Week 5 Legislative Summary

Goodbye grocery tax! At least half of it, anyway. The last vote of the week by the House was to join Governor Beebe in his effort to repeal one half of the recessive sales tax on groceries. The bill passed 99-0, and the emergency clause was adopted, meaning that the law will become effective on July 1, 2007. The bill is being transmitted to the Governor's office now.

This was the biggest news in a week that definitely saw an increase in activity. There have now been 819 bills filed to date: 503 in the House and 316 in the Senate. The negotiated tax relief package actually broke on Tuesday, and you can footage of video and my thoughts on the issue in this blog entry. The final tax package, once all votes are cast, will consist as follows:

1. Cutting the state sales tax on groceries from 6 percent to 3 percent ;

2. Adjusting income-tax brackets so that the poorest of Arkansans pay no state income taxes. House Bill 1443 has more than 90 House sponsors and is in the House Revenue and Taxation Committee; and

3. Cutting the state sales tax on energy consumed by manufacturers from 6 percent to 4 ½ percent this coming fiscal year and by another ½ percent during the second year of the biennium. Senate Bill 119 has been approved in the Senate.

This package takes care of two of my five legislative goals for the session. The entire package consists of a record $319-million tax cut, according to state finance officials: $252 million from the grocery-tax reduction, $32 million from the income-tax cut; and $35 million from the manufacturers’ tax cut. That doesn’t count a $50-per-year increase in property-tax relief that has already been passed by us here in the House. Some 538,000 homeowners will be helped by that legislation.

Case in point -- Sales Tax reduction: A family of four that spends $150 a week on food items at the grocery store will save $234 a year under the grocery-tax reduction. It doesn’t apply to restaurant meals or to prepared foods such as those at grocery stores’ delicatessens. The reduction will slice $252 million in state general revenues over the next two fiscal years. The tax cut also doesn’t affect any sales taxes on groceries levied by cities and counties or the state’s one-eighth-cent conservation tax.

Case in point -- Income Tax repeal: Adjusting income-tax tables will help some 81,000 Arkansans who are at or below the federal poverty line. A family of four with an income of $20,700 is considered to be living in poverty and will be freed of paying state income taxes. The poverty level is $10,200 for a single person, and $17,200 for a household of two. Also, a single head of household or widow or widower with an income of less than $13,700 would be taken off the state income tax rolls.

Case in point -- sales tax on energy relief for manufacturers: The effort to help manufacturers stems from the loss of some 7,000 high-paying manufacturing jobs in the state since November 2005. The governor initially sought a 1-percent cut in the state sales tax on energy consumption by manufacturing plants but agreed to the 1 ½-percent cut as part of the compromise with House leadership.

The deadline to file proposed constitutional amendments passed on Wednesday. You can read about each of these filings from these entries(Feb. 5 and Feb. 7) in the blog. Those bills will be considered by each chamber’s committee on state agencies and governmental affairs. Lawmakers can submit up to three proposed amendments each November general election.

In other action, the House approved:

1. House Bill 1036, by Rep. David Johnson (D-Little Rock), to fine payday lenders $300 for every time they charge interest rates about the state’s 17 percent usury limit. Such a loan goes like this: a customer in need of $300 writes a check for $360 and collects $300 in cash. The lender typically wouldn’t cash the cash the check for two weeks. If the borrower cannot pay off the loan in that time, he can pay another $60 in fees for another two weeks on the original $300 loan. According to testimony on the bill, the average payday loan in Arkansas is $300 with an average payout of $800. Defenders of the payday-loan businesses said they’re the only option for fast, short-term loans for many people. The bill goes to the Senate. I was a co-sponsor of this legislation. Here are my thoughts on it, and here is the roll call House vote from Thursday:



2. House Bill 1039, by Rep. John Paul Wells (D-Paris), to repeal mandates for public schools to have set amounts of time for physical activity for students. Supporters of the bill say academics have come at the expense of a mandate issued in 2005 by the state Department of Education that schools have at least 150 minutes of physical activity for students in kindergarten through the 12th grade. HB 1039 gives schools more flexibility, supporters say. Here are my thoughts on it, and here is the roll call House vote:



3. My House Bill 1362, which revises portions of the recently-enacted Beneficiary Deed. This legislation was the product a group of Arkansas lawyers specializing in real estate and estate planning. In Spring 2006, the Arkansas Lawyer published an article by Chris Barrier outlining problems with the law and potential solutions to revise it. Here are my thoughts on it, and here is the roll call House vote:



There are several cumbersome and fairly controversial bills on the horizon, so check the blog for updates. I'll continue to keep you posted as we continue through the session.