Arkansas News Bureau
LITTLE ROCK — Gov. Mike Beebe made clear Friday that tax cuts for grocery shoppers and manufacturers will be the only revenue reducing measures coming out of the Legislature this year.
In tough economic times, the state can’t afford most of the more than $1 billion in tax cuts and exemptions — nearly one-fourth of the state’s annual general revenue budget — pending before the General Assembly, Beebe said.
“The recession gripping our national economy is deepening, and state revenues are likely to decline further in the coming months,” Beebe said in his weekly radio address. “As much as we all like tax cuts, our budget is already stretched incredibly tight, and the state can’t afford all of these cuts right now. The times require us to be especially cautious with any proposal that reduces state revenues.”
The exceptions are a 1-cent cut in the state sales tax on groceries to reduce the levy from 3 cents to 2 cents. Beebe proposed the cut in the balanced budget he presented to lawmakers last fall as a follow-up to a 50 percent reduction — from 6 cents to 3 cents — adopted two years ago.
In his 2006 campaign for governor, Beebe promised to eventually eliminate the food tax altogether.
This week, the governor came out in support of a further cut in the sales tax manufacturers pay for their utilities after backing a 2 percent reduction over two yeas in 2007.
Beebe said Friday he agreed to an additional three-fourths of 1 percent reduction to bolster businesses that keep Arkansans working.
Arkansas’ unemployment rate stood a 6.4 percent in January, and though well below the national jobless rate of 7.1 percent, the state has experienced significant layoffs and plant closings.
Manufacturing and industrial jobs are keys to economic stability for thousands of Arkansans, and government has an obligation to step in to help when those jobs are put at risk, the governor said.
The Senate on Thursday approved and sent to the House Senate Bill 875 by Sen. Barbara Horn, D-Foreman, which would reduce the sales tax on manufacturers’ utilities from 3.875 percent to 3.125 percent, not including the 0.125 percent conservation tax voters approved in 1996. The House Revenue and Taxation Committee endorsed an identical House version Thursday.
“This bill is a targeted step that would ease the tax burden of these vital employers, thereby allowing them to cover their payroll expenses and keep Arkansans at work,” Beebe said.
The revenue loss would be about $9.6 million a year but would not affect essential state services, according to the governor.
He said the bill would specifically target businesses that create manufacturing positions and would help keep Arkansas competitive with surrounding states.
“Above all, this legislation sends the message that we will continue to fight every single day to create new jobs and strengthen our economy and our employers here in Arkansas,” he said.
The grocery tax cut would cost the state $30 million in general revenue and $10 million in special revenue annually. It is contained in SB 88 by Sen. Bobby Glover, D-Carlisle, which earlier passed the Senate and was endorsed by the House tax committee Thursday. The bill goes to the House, where all 100 members are co-sponsors.
