A bill that would have increased taxes on cigarettes and vaping products while creating an earned income tax credit for lower-income Arkansans is headed to interim study, the bill’s sponsor said Wednesday (April 3).
In an interview with Talk Business & Politics, Senate President Pro Tempore Jim Hendren, R-Sulphur Springs, said it’s too late in the session to gain support for Senate Bill 571.
“Basically, there’s not any more Revenue and Tax meetings on the House side,” he said. “I doubt that I had the votes at this point anyway. There’s a lot of weariness with hard issues. So I’m probably going to pull it back, put it in interim study, spend the next two years trying to build support on both ends, and get a plan for next session.”
The bill passed the Senate March 20 with no votes to spare, 18-14 with 3 not voting, but was never heard in a House committee.
“There is a willingness and an understanding that we need to do something about vaping,” Hendren said. “I probably should have started this effort earlier, but I knew it would be controversial, and I didn’t want it to get all intertwined and complicate the real issues that we’d come here to do with highways and taxes and transformation, so I purposely waited,” he said. “But an issue like that, you need to have a pretty good plan and consensus before you start because you’re facing some very formidable foes.”
Those foes included vaping shops, large vaping companies such as Juul, tobacco companies and retailers, Hendren said.
Regarding sending the bill to interim study, he said, “I know that’s where things go to die, but I feel pretty passionate that we’re going to continue to work the issue, and we’ll come prepared in two years to do something.”
The bill would have enacted almost $100 million in cigarette and e-cigarette taxes by levying a 20% special excise tax at the retail level on cigarettes, or 80 cents a pack. E-cigarettes would have been subject to the same taxes as traditional tobacco products not including cigarettes, amounting to a 67% tax. E-cigarettes currently are subject only to the state’s sales and use tax.
Those tax increases would have funded the same amount in tax cuts, including an earned income tax credit of at least 5% of eligible income refunded through a check sent to lower-income Arkansans.
The bill also would have reduced from 2% to zero the tax rate for incomes between $4,500 and $8,890 in the tax table for individuals making less than $22,000. It also would have increased the standard deduction from $2,000 to $3,300.