New year, new tax

The Texarkana Gazette profiles the 2003 Streamlined Sales Tax Act in this morning's edition of the newspaper. On January 1, grocery shoppers will see a 7% increase on their receipts for food and food ingredients (and a 10% increase on utility bills). Although this Act was enacted before my time in the Legislature, I am catching the brunt of the displeasure.

I am concerned about the new taxes and particularly concerned about grocery stores on the Arkansas-side of town. It remains to be seen what percentage of the population will continue grocery shopping on the Arkansas-side when they can save 7 cents on the dollar by going across the street and shopping in Texas, but this will no doubt deal a severe blow to local stores, specifically Albertson's on State Line Avenue. Truthfully, everyone within 20 or 30 miles of the Texas border is affected by the difference in the tax structure between the two states -- Texas has no income tax and doesn't levy sales tax on groceries or energy consumption. A long-term solution to equalize the difference would go a long way towards increasing not only economic activity in southwest Arkansas but revenue to the state as well.

I have heard from a few constituents at a DF&A seminar (and elsewhere) who are contemplating a move to Texas over this change, but I'm hopeful that the Legislature can cut the other half of the grocery tax in 2009 to lessen the impact of the new tax. It's helpful that this tax cut remains the governor's priority as well. Even if we're able to cut the other half of the grocery tax, though, the 1/8 cent conservation tax will remain in place, as it was added to the Arkansas Constitution by a vote of the people. In addition, local taxes would continue to be levied after a full repeal of the grocery tax. I'd also like to see an increase in the severance tax to offset a tax cut on other regressive taxes like the sales tax on energy consumption for businesses and consumers.

Many retailers across the state will also feel the changes after the new rules go into effect for levying sales tax at the point of delivery. Case in point: If you live in Texarkana and purchase a duck call from Stuttgart, the retailer in Stuttgart must levy sales tax at the Texarkana rate. That only means that the retailer must now keep a book handy of all sales tax rates in the United States. Complicating matters is that the retailer must then go further and confirm that I do live in the city limits of Texarkana. If I merely have a Texarkana address and live out on a rural route outside of the city limits, the retailer must collect 7.5% on sales tax. However, if I live inside the city limits, the tax would be 10%. It's a mess.

In addition, the $2,500 cap on sales tax (on most items) is being removed in order to fit within the uniformity requirement of the SSTP. This means that consumers across the state will see an increase on high dollar purchases in excess of $2,500 like flat panel TVs, etc. Legislators in 2003 were told by SSTP advocates that the state would see up to a $400 million increase in revenue by being a member of the compact. It's highly unlikely that we'll ever see that kind of revenue, but in the meantime, we'll see what impact this measure has on Arkansas retailers and consumers.