A new report from the Arkansas Department of Finance & Administration shows that Arkansas is giving away nearly $1 billion per year in sales tax exemptions for specific industries, purchases, or special interests.
Yes, that’s $1 billion—with a “B.” Or close to a third of what the state income tax brings in.
This does not even include broad-based exemptions such as for prescription drugs, as well as for groceries and used vehicles (both of which are taxed at reduced rates).
From advertising space in newspapers to twine used in tomato production, these dozens and dozens of carve-outs to our sales tax quickly add up. And unlike animals, not all tax cuts are equal. Some are more equal than others.
Here’s why: every penny Arkansas chooses to give away to special interests in the form of tax exemptions is a penny that cannot go towards chipping away at the state income tax.
In fact, if we were to repeal these exemptions overnight, we’d be nearly a third of the way to eliminating the state income tax.
But this has not stopped additional bills to create carve-outs to the sales tax from popping up this legislative session.
Here are just a sampling of the new bills filed to create new sales tax exemptions for specific purchases, industries, and organizations:
No doubt many of these bills and their sponsors are well-intentioned, but policymakers and the public must be more aware that they come at a real cost. And that cost is a longer and longer timeframe for eliminating our state income tax and reversing our long-held state tradition of punishing our neighbors for working hard.
We'll be tracking many of these sales tax exemption bills in our all-new bill tracker.
While we are generally in favor of any tax cut that puts more money in the pockets of Arkansans, we would highly prefer that state policymakers focus their attention on reducing state spending (and exemptions) and develop a comprehensive plan for phasing out the state income tax. For that reason, we are giving these sales tax exemptions low grades.