Tax Cut Bills In The Mix

This legislative session the debate over tax cuts won’t end with Gov. Mike Beebe’s half-cent grocery tax reduction.

State lawmakers of both political stripes have made it clear they intend to find savings in the state budget to sustain additional tax cuts with or without the Governor’s blessing.

On Tuesday, the Governor’s proposed tax cut on groceries, a used car tax proposal, and a tax cut billed aimed at manufacturers were filed by Senate and House leaders.

State Sen. Larry Teague, D-Nashville, who heads the Senate Revenue and Tax Committee filed SB 276, a measure that would reduce the sales tax on groceries by another half-cent to 1.375 percent.

With respect to the grocery sales tax revenue, 76.6 percent of the sales tax is deposited in general revenues; 14.9 percent is earmarked for an educational adequacy account; and 8.5 percent is dedicated to property tax relief.

Teague’s bill, which mirrors Gov. Mike Beebe’s grocery tax cut promise, would go into effect on July 1, 2011 if approved. It would strip approximately $15 million from state revenues per year.

Another bill, SB 274, is sponsored by Sen. Gilbert Baker, R-Conway, and Sen. Paul Bookout, D-Jonesboro. Baker is the co-chair of the powerful Joint Budget Committee, while Bookout serves as Senate President Pro Tempore.

The bill would raise the dollar value for sales and use taxes to apply on purchases of new and used vehicles, trailers and semitrailers from $2,500 to $5,000.

SB 274 would cost the state roughly $7 million annually in current tax collections.  Other sponsors include Sen. Robert Thompson, D-Paragould, Sen. Ruth Whitaker, R-Cedarville, and Sen. Michael Lamoureux, R-Russellville.

A third bill, SB 269, would completely exempt manufacturers from having to pay sales and use taxes on fuel and energy used in their processes. State Sen. Jake Files, R-Fort Smith, and Rep. Keith Ingram, D-West Memphis, are co-sponsors of the bill.

Language in SB 269 states that the primary reason for the tax cut is to preserve and expand manufacturing jobs in Arkansas. Supporters of the bill, which includes many chambers of commerce and economic development officials, have long said that surrounding states have a competitive advantage in jobs recruitment without the tax break.

A cost impact on the bill was not immediately available.