Gov. Mike Beebe’s proposal to reduce the state sales tax on groceries to one-eighth of a cent if certain economic triggers are met cleared a House committee Friday.
House Bill 1234, sponsored by Darrin Williams, D-Little Rock, received a "do pass" recommendation from the House Revenue and Tax Committee in a voice vote. No "no" votes were heard. The bill goes to the House.
Tim Leathers, deputy director of the state Department of Finance and Administration, said the fiscal impact of the bill would be $70 million a year, though it would be partially offset by a decrease in expenditures that would have to occur before the tax cut could take effect.
Under the bill, the tax cut would take effect when certain budget obligations, including desegregation payments to three Pulaski County school districts and payments on certain bonds, decline by at least $35 million for six consecutive months.
"I think this is a positive step for the working families of Arkansas," Williams told the committee. "The grocery tax is one of the most regressive taxes that we have."
Beebe has made lowering the grocery tax one of the key policy goals of his administration, having campaigned on the issue when he first ran for governor in 2006. The tax was 6 cents on the dollar when he took office and has been gradually lowered to its current rate of 1 1/2 cents on the dollar.
HB 1234 would eliminate the tax except for a 1/8-cent tax that cannot be lifted without amending the state constitution.
A matching Senate bill sponsored by Sen. Jason Rapert, R-Conway, has not yet been taken up by the Senate’s tax committee.
The action on HB 1234 comes while House and Senate leaders and the governor are negotiating the terms of what is expected to be a deal to pass $100 million in tax cuts. The cuts in that package are not expected to be tied to any economic triggers but are expected to draw on the savings from the so-called private option for expanding health care coverage under the federal Affordable Care Act, if the expansion wins legislative approval.