Tax Code 101: Arkansas Lawmakers Tackle State’s 101 Sales Tax Exemptions


LITTLE ROCK, Ark. – As lawmakers in Washington continue to tackle the latest GOP tax plan, the Arkansas legislature is overhauling the tax code at the state and local level.

The discussion of sales tax exemptions fell on the chopping block Tuesday at the latest meeting of the Tax Reform and Relief Legislative Task Force.

“Quite frankly, some of those are tough and some of them you probably don’t want to do,” said Randall Bauer, the project manager of PFM Group Consulting, LLC, which the task force hired to help analyze the state’s tax system. 

According to a 2011 report from the Arkansas Department of Finance and Administration (DFA), the state has 101 sales tax exemptions that total $1.4 billion. The largest exemption is gasoline, followed by a partial exemption on food and food ingredients, prescription drugs and sales to some nursing homes and hospitals.

The 16 members of the task force will ultimately decided which work and which don’t.

“If we have $100 million or $200 million that we’re going to cut in taxes, where does it make the most sense to do that,” Sen. Jim Hendren, R-Gravette, told his colleagues.

“There’s so many different ways that they could attack this,” said Ellie Wheeler, the senior policy analyst for Arkansas Advocates for Children and Families.

Wheeler has sat through every meeting of the task force to make sure lawmakers don’t make her two priorities the loser in this fight.

“I’m concerned that maybe it’s possible to shift some of the taxes toward lower-income working families instead of smoothing it out a little bit more,” she said. 

Sen. Hendren, the task force’s co-chair, asked Bauer and his team to identify the exemptions that could go by January.  

DFA and the consultant also plan to monitor how the Amazon sales tax and others affect the state.

“The number is rather insignificant compared to the other issues we’re seeing in sales tax collections,” said a DFA representative. 

Bauer also recommended the possibility of adding more auditors to the state’s arsenal, which other states have done. 

Wheeler warns whatever lawmakers ultimately decide will impact every Arkansan. 

“If we have less money in the budget because we change our tax system, we have schools that aren’t as good and health care systems that aren’t as good,” she said. “It’s going to really have an impact on the legislators’ ability to fund programs that they care about down the line. Some people think of taxes as sort of an afterthought, but it’s really the foundation of all of the possibilities that we can have.”

The task force will tackle excise tax exemptions Wednesday. 

Lawmakers from other states who have developed tax policy will go before the task force in December to talk the good, the bad and the ugly. The members will also debate property taxes then. 

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