Governor Asa Hutchinson wants to impose a higher tax on gasoline and diesel fuel. He says a wholesale tax will add about 3¢ per gallon on gasoline and 6¢ on diesel fuel. The Arkansas Senate has already passed his plan (SB336) and it will now be considered by the House of Representatives.
Why does Governor Hutchinson want a new wholesale tax instead of trying to increase the existing retail per gallon tax? Is it more efficient? No. Easier to administer? No.
The ONLY reason Governor Hutchinson is pushing a wholesale tax on gasoline and diesel is because he doesn’t think he will get a 3/4th vote in the House of Representatives and is trying to thwart the Arkansas Constitution – specifically Amendment 19.
His fuel tax increase received a 3/4ths vote in the Senate, but the bill may not get a 3/4ths vote in the House of Representatives. Will your Representative want to raise taxes knowing he or she has to run for re-election next year?
Because of Amendment 19, to increase the existing per gallon tax at the retail level would require approval by a vote of 3/4ths of the House of Representatives and 3/4ths of the Senate as required by Amendment 19.
Never heard of Amendment 19? It raised the vote required to pass certain taxes. Prior to Amendment 19 it took a 2/3rds vote to pass any tax. But because the finances of the state were so messed up, Amendment 19 was passed to require a 3/4ths vote to increase any existing tax (meaning 1934). While the Amendment made it harder to increase existing taxes, new taxes began being passed by a mere majority vote.
Here is what Amendment 19 says:
Amend. 19 [as appears in Article 5 § 38]
2. None of the rates for property, excise, privilege or personal taxes, now levied shall be increased by the General Assembly except after the approval of the qualified electors voting thereon at an election, or in case of emergency, by the votes of three-fourths of the members elected to each House of the General Assembly.
The fuel tax existed in 1934.
The Governor wants to try to bypass Amendment 19 by levying the tax in a slightly different way, at the wholesale level instead of at retail, and then say it is a “new” tax and not subject to the vote requirement in Amendment 19. To try to further distinguish the tax from the existing tax his legislation also includes a provision to calculate the initial tax based on the average price of fuel instead of being forthright and just stating the amount per gallon. Yet, the effect of the Governor’s wholesale tax is the same as increasing the existing tax. It is just a sleight of hand.
For years, tax and spenders have been advising politicians they can change an element or two in a tax and claim Amendment 19 doesn’t apply. Their risky advise is based on an Arkansas Supreme Court case from 1939 (Caldarera v. McCarroll). In that case the court allowed a beer tax to be imposed without a 3/4ths vote. [i] But there is a huge problem for the tax and spenders who rely on the case, although the particular beer tax was upheld by a four to three opinion, only two of the justices agreed politicians could avoid the ¾ths vote requirement by changing some elements of the tax. The other two justices who upheld the tax used other grounds.
Here is another problem in using the case, if the Governor can use a sleight of hand to bypass the 3/4ths vote requirement for the fuel tax, then EVERY TAX THAT EXISTED IN 1934 can be bypassed by the same kind of sleight of hand. And, that would make Amendment 19 meaningless. Do you think the people meant for Amendment 19 to be meaningless?
There is a premise that says – You can’t do indirectly what you are prohibited from doing directly. But that is exactly what the Governor is prepared to try if he can’t get the House of Representatives to pass the tax by a 3/4ths margin..
The plan to bypass Amendment 19 is on very shaky legal grounds. If the Governor’s wholesale fuel tax gets a majority vote in the House of Representatives but does not get a 3/4ths vote, the tax is a prime target for a legal challenge. Plus, a lawsuit could be much broader than just his fuel tax increase and could include a challenge of other taxes.
Ask your state Representative – Do you really want to be counted as one of the politicians to use sleight of hand to try to bypass Amendment 19?
[i] See CALDARERA v. MCCARROLL, 198 Ark. 584 (1939)