Posted 11/25/2012 11:29 am
Updated 2 years ago
LITTLE ROCK — Gov. Mike Beebe's pledge to cut Arkansas' sales tax on groceries has always come with a giant asterisk: He'd do it over time if the state could take the financial hit. That asterisk just got a lot bigger and it could stick around after he leaves office in 2015.
Beebe's proposal to eliminate nearly all of the remaining sales tax on groceries if the state's desegregation settlement payments and bond obligations fall over a half-year period is his last shot at keeping a promise he made when he ran for governor in 2006. It also could keep the issue alive for a parade of candidates already lining up for the 2014 race, when he won't be on the ballot any longer.
Beebe offered the conditional tax cut this month as part of his proposed $4.9 billion budget for next year, calling for reducing the state's grocery tax from 1.5 percent to 0.125 percent. The cut would eliminate all state sales tax on groceries except for a one-eighth cent tax for conservation approved by voters as part of a constitutional amendment.
The tax cut, which officials estimate would cost the state $69 million, would be triggered if obligations in several key areas decline by at least $35 million for six consecutive months. They include payments the state must make to three Little Rock-area school districts as part of a desegregation settlement and some state bond payments.
It's an approach that Beebe said he struggled with, as he also faced a $138 million shortfall in the state's Medicaid program that officials propose filling by cutting services for the elderly.
"I don't think in good conscience, with the current revenue and talking about the kind of cuts we're talking about in Medicaid, at the same time we could talk about taking $70 million away from the budget," Beebe said. "It's just not responsible. It's consistent with what I said, and I said we're going to attack the grocery tax and we're going to reduce it in a responsible manner as we can afford to do it without adversely impacting state services."
The proposed tax cut would be addressed in legislation separate from Beebe's budget. State Finance and Administration Director Richard Weiss said the proposal would likely not include an expiration date, meaning the tax could be triggered any time including after Beebe leaves office.
That provision could open up the possibility that eliminating a tax Beebe has often derided as the most regressive one on the state's books could remain as an issue in the next governor's race. Beebe won election in 2006 and re-election four years later primarily on his tax cut pledge, and has successfully pushed for its reduction from 6 percent since 2007.
It's likely an issue that many of the potential candidates to succeed Beebe will want to claim as their own, especially since many of them saw how much the issue benefited Beebe in his 2006 race.
That include includes Attorney General Dustin McDaniel, the only announced candidate for the office so far, and his potential rival for the Democratic nomination, former Lt. Gov. Bill Halter. Former Congressman Asa Hutchinson, who is also considering a run, initially said the grocery tax cut wasn't part of his agenda when he ran against Beebe six years ago and then later called for its immediate elimination.
The proposal offers McDaniel a chance to claim two victories if he prevails in his request for a federal court to end the desegregation payments. Not only could he claim a court victory. He'd get to claim credit for the trigger that allowed the tax cut Beebe seeks.
But Beebe's proposal more immediately will shape a session where Republicans, controlling the Legislature for the first time since Reconstruction, had hoped to push for income tax reductions and other cuts.
Incoming Senate President Michael Lamoureux, R-Russellville, took Beebe's approach as a welcome sign since the governor wasn't telling lawmakers that his cut was the only reduction the state could afford. Lamoureux said the approach showed how tight of a budget Beebe believes the state faces.
"What doesn't sit well with me is when somebody says we don't have money to do anything except what I want to do," Lamoureux said. "He did not do that. He just said the money is real tight and I'm not sure what we can do."
Beebe's proposal could also invite Republican lawmakers to offer a competing proposal, to link their tax cut ideas to a similar drop in the state's obligations over time. If Republicans want to do that, Beebe warns that "they better get very creative."
"I don't see the road to do that right now," he said. "But I always listen to everybody."