The Democrat Gazette sought comment from Representative Joe Jett -R concerning Arkansas having the highest sales taxes. A study shows Arkansas’ combined state and local sales taxes statistically tied with Tennessee for having the highest sales taxes in the country.[i]
While Jett said it is time for the legislature to look at our state sales tax and “prune it back some,” Jett tried to minimize the legislature’s responsibility for taxes by claiming legislators can’t control almost a third of the state sales tax.
Before we explain why Jett is wrong about how much control the legislature has over sales taxes, here are a couple of things you need to know about the lack of pruning.
- Since July 2013 Arkansas’ combined sales taxes have been ranked either the second or third highest in the nation by the same organization. So, why wasn’t it time to “prune it back some” in the legislative sessions of 2013, 2014, 2015, 2016, 2017, 2018, or 2019?
- Why did Jett and the legislature decide to propose a 0.5% sales tax to appear on your 2020 ballot if they are even halfway serious about pruning the sales tax?
Jett Wrong About Lack Of Control
Rep. Joe Jett told the Democrat-Gazette that the legislature only controls 4.5% of the 6.5% state sales tax. Why raise such a notion? Was it to start diminishing the peoples’ hope the legislature will prune back the sales tax. Here is his argument:
Rep. Joe Jett, R-Success, who is chairman of the House Revenue and Taxation Committee, said in an interview last week that “we [the state legislature] can control 4.5% of the 6.5%” of the state’s sales-tax rate. He noted that a 0.875% sales tax is for funding a constitutionally mandated adequate education for public schools; and constitutional amendments resulted in a rate of 0.125% for conservation, a rate of 0.5% for the homestead property tax credit, and a rate of 0.5% for highways and roads.
Jett’s long tenure as Chair of the House Revenue and Taxation Committee makes this statement all the more perplexing. He has been chair for four and one half years (first as a Democrat and then as a Republican) but he still claims limited responsibility.
Let’s look at each sales tax Jett claims the legislature has no control over.
- 5% for the homestead property tax credit – Funny he should mention the Homestead Property Tax Credit. Representative Joe Jett was a COSPONSOR of a bill passed this year to RAID THE FUND FOR PROPERTY TAX RELIEF to the tune of over $32.7 million! Under Act 808, over $8.2 million is being spent for voting machines and over $24.5 million is being sent to the Long-Term Reserve Fund where it can be spent by the Governor. Jett is using the name of the tax to claim they can’t touch it because it is for property tax relief, but he and his colleagues are responsible for using the tax as a slush fund for any government project they wish. The legislature has full control over this tax. Either give ALL the money collected back to taxpayers as property tax relief as the name says or reduce the sales tax going into the fund! No more slush fund.
- 5% for highways and roads – The existing 0.5% tax for highways and roads is to pay off specific highway projects. First, the legislature could have exercised control by NOT PROPOSING a new tax for when this one ends. Second, the legislature could have been paying part of the debt early instead of blowing surpluses over the years.
- Constitutional Amendment imposing 0.125% for conservation – Since this “environment enhancement tax” is in the constitution Jett claims the legislature does not have control. Yet, the legislature has the power to propose three constitutional amendments and could have proposed an amendment to repeal or modify this tax. They weren’t shy about proposing a constitutional amendment for your 2020 ballot to impose a sales tax but claim there is nothing they can do to reduce a sales tax in the constitution. If the legislature proposed eliminating this tax, do you really think the people would say “no” and want to be taxed.
If you are not familiar with the environmental enhancement tax, here is where the money goes: Game and Fish Commission 45%, Dept. of Parks and Tourism 45%, Dept. of Heritage 9% and Keep Arkansas Beautiful 1%. By the way, the environmental enhancement tax is still imposed on groceries.
- 875% sales tax is for public schools – There is no restriction keeping the legislature from repealing the portion of the sales tax going to public schools and providing the same amount from general revenue or some other source of revenue. This is not a question of “can’t” as Jett would lead you to believe, it is just a political question of where the funding should come from. Does anyone remember the supposed $295.4 million surplus the legislature blew though at the end of June? How about that money?
Conduit For Action is not advocating that any particular part of the sales tax be repealed. We just know the 6.5% state sales tax is high and must point out the legislature is not restricted in how they reduce the state sales tax. Currently the legislature is exercising control by keeping the sales tax high.
We also note although we are tied with Tennessee, Tennessee does not have an income tax on wages.
Local Sales Taxes
Rep. Joe Jett failed to mention local sales taxes in his comments. Are you supposed to think the legislature has no control over the ever increasing local sales taxes? Perhaps you are supposed to assume the legislature doesn’t have any control over local sales taxes. But, the legislature could set limits on taxes if it wanted to.
Local sales taxes may be levied only to the extent the state allows them to through several laws authorizing local sales taxes. If the legislature chose, it could set a ceiling on local sales taxes. Politically, very difficult but still possible.
Just as importantly, the legislature could end the practice of local governments using special elections to pass tax increases. Many local governments do this because they know it is easier to increase taxes when voter turnout is low.
In 2017 the legislature failed to pass SB723 which would have ended the practice of having special elections to pass local sales taxes. The bill passed the Senate and was only one vote short in the House. Representative Justin Gonzales filed a similar bill this year but it went nowhere.[ii]
Another 2019 Sales Tax Increase
Internet Sales Tax. A majority of the legislature also decided this year to collect more sales tax FROM YOU by imposing the Internet Sales Tax which makes YOU pay sales tax even if you use the internet to make a purchase from a seller who has no connection to Arkansas other than shipping the goods to Arkansas. Jett didn’t vote.
Tax And Spend Snapping Turtles
There is an old folk tale that says if a snapping turtle bites you it won’t let go until it thunders.
Tax and spend politicians are like snapping turtles. They aren’t going to let go of any sales taxes unless you THUNDER!
[i] State ties for No. 1 in sales-tax ranking, Democrat Gazette, 07/21/2019 – Citing Tax Foundation report