Gov. Beebe and leaders of the House of Representative struck a deal this week that will ensure a reduction in the state sales tax on groceries from 3 to 6 percent and thousands of low-income workers will get a modicum of income-tax relief as well.
That is about as good an outcome as anyone can expect of the legislature. The tax system, which has grown steadily more regressive for 30 years, will be just a little fairer — not as productive, but fairer.
Despite all the talk about eliminating or reducing the tax on groceries for the poor, cutting the tax will not do much for the truly poor. Nearly 600,000 of the poorest people receive food stamps and thus pay little sales tax on their foodstuffs.
But if the state is going to give broad tax relief to its people, which Gov. Beebe proclaimed this month as his goal, then reducing or removing the tax on groceries is about the most equitable way to do it. For 40 years, Arkansas has been in the perverse position of taxing the food of children, but not the food of chickens, hogs and cows, a perversity to which former Sen. Bud Canada loved to call attention.
House Speaker Benny Petrus preferred to give an income-tax break targeted only at low-income working families, and that will happen, too. Under Govs. Dale Bumpers and Bill Clinton, the legislature peeled from the tax rolls those whose family earnings left them below the federal poverty line. The law will be amended to raise the tax threshold to the current poverty level, almost $21,000 for a family of four.
That is a good step, although it would be better if the state enacted an earned income-tax credit that would reward the full-time work of the poorest families whose incomes are so low that they don’t have a tax liability. But let us not fail to acknowledge the good work of Gov. Beebe and the legislature because they did not achieve miracles. More tax cutting is in the works, for manufacturers and processors mainly, but probably for many other interests as well.
Beebe and the lawmakers should remind themselves of the peril that the slackened revenues from the tax changes in two or four years will compel a tax increase. And we know what that will be: a higher sales tax rate, which will victimize the very people whom this week’s good works helped.
