Tax break, tax hikes go into effect Monday


LITTLE ROCK — The first modest step toward a projected $140 million tax cut approved by the Legislature this year becomes effective Monday, but what most Arkansans likely will feel more readily in the pocketbook is the sales tax increase they voted last fall to impose upon themselves.

The two are among hundreds of measures that go into effect on the first day of the 2013-2014 state fiscal year, most of them the appropriations necessary to operate state government and its $4.9 billion budget through June 30, 2014.

Many of the most high-profile pieces of legislation passed during a sometimes contentious 100-day session, from abortion restrictions to gun rights, contained emergency clauses that put them into effect the day Gov. Mike Beebe signed them, let them become law without his signature or, in the case of two abortion bans and legislation requiring photo identification at the polls, the day lawmakers overrode gubernatorial vetoes.

Other legislation signed into law without an emergency clause or other effective date will go into effect Aug. 16, 90 days after the Legislature adjourned.

Among the major legislative acts this year is a $140 million package of tax reductions. Most won’t go into effect until later this year or in 2014 and 2015 so the state can take advantage of expected savings from a plan to pay for expanding health insurance for more low-income Arkansans by using Medicaid dollars to buy private coverage instead of adding 250,000 people to the public assistance program.

Beginning Monday, Arkansans in the lowest tax bracket will receive a tax break under Act 1459, which will provide a state income tax cut of one-tenth of 1 percent for all tax brackets. The impact to state coffers ultimately will be about $56 million a year, but only about $2.4 million over the next 12 months. The break for the rest of the tax brackets will be phased in through FY 2015-16.

The one general tax increase that goes into effect Monday comes under Amendment 91, which voters passed handily in the November 2012 general election, raising the state sales tax by a half-cent from 6 percent to 6.5 percent for 10 years to fund a $1.8 billion bond issue to build a statewide four-lane highway system.

Purchases of groceries, medicine, gasoline and diesel fuel are exempted from the additional levy.

State highway officials say the road projects will relieve traffic congestion and improve safety, while generating more than 40,000 jobs, funding a number of large expensive projects across Arkansas and adding to city and county roadway funds.

Some other tax levies will increase as a result of Amendment 91. The sales tax rate manufacturers pay for the electricity they use will rise to 4.75 percent and the rate for other utilities used in manufacturing will rise to 3.25 percent. Those increases will be offset by reductions included in the tax cut package that will go into effect later.

Other new laws that go into effect Monday include Act 1398 and Act 1450, identical measures that reduce the state tax on groceries from 1.5 percent to 0.125 percent. However, the effects of the law will not show up on grocery receipts right away because it is contingent upon the state paying off certain bond obligations and costs related to the long-time desegregation lawsuit involving three Pulaski County school districts.

Act 152 amends the Arkansas Alternative Fuels Development Program to provide rebate incentives for the differential costs and conversion costs related to converting diesel- and gas-powered vehicles to compressed natural gas- or propane gas-powered vehicles.

Act 594 authorizes the boards of local technical institutes to determine minimum student tuition and fees.

Act 1499 creates the offense of health care fraud and establishes the Office of the Medicaid Inspector General within the governor’s office to investigate Medicaid fraud.