Supporters and foes of a proposed constitutional amendment that would permanently extend the state's 0.5% sales tax for funding highways, bridges and local roads are rallying their troops.
The proposed constitutional amendment is Issue 1 on the Nov. 3 general election ballot.
Gov. Asa Hutchinson and the Vote for Roads, Vote for Issue 1 committee - chaired by Arkansas Trucking Association President Shannon Newton - are the leading proponents of Issue 1.
The proposal would make permanent the tax that voters approved in November 2012 for a 10-year period, which is Amendment 91 to the Arkansas Constitution. Food and food ingredients are exempt from the tax.
Issue 1 is the second part of Hutchinson's two-pronged $300 million-a-year highway plan.
If voters approve Issue 1, state officials project the state Department of Transportation would receive about $205 million a year, while cities and counties would each get about $44 million a year for their roads.
"We'll be working very hard from this day forward to make sure that people understand that this is a way to fund highways into the future in Arkansas [and] improve our roads and our bridges without raising taxes," the Republican governor said at a recent event.
Attorney General Leslie Rutledge said she's a conservative Republican, but Issue 1 is not a partisan issue.
"We've got Democrats, we've got Republicans, we've got people across the aisle, independents that are supportive of this issue," she said at a news conference.
"We have ask when you put your kids on a school bus or you think about your grandkids getting on that school bus, do you want them riding that bus on the most dangerous, worst bridges and roads in Arkansas? No, you want them driving on the safest and the best roads in the state of Arkansas, so we need to vote yes for the best roads in Arkansas," Rutledge said.
Opponents Speak Up
The No Permanent Tax, No on Issue 1 committee - chaired by Americans for Prosperity's Arkansas Director Ryan Norris and former state Rep. Jonathan Barnett, R-Siloam Springs - are among the proposal's leading opponents.
Michael Pakko, chairman of the Libertarian Party of Arkansas, said the party's executive committee approved a resolution opposing Issue 1 and "libertarians don't like taxes, that's obvious.
"But this one in particular is misdirected and inefficient in the sense that traditionally infrastructure, highways have been financed with mechanisms that are like user fees, car registrations, gasoline taxes, diesel taxes, things like that, and the link is pretty tenuous between a sales tax and the users of highways and roads," Pakko said in an interview in Little Rock at a rally of the coalition opposed to Issue 1.
"So just on the just basic principle that when you can assign the cost of an infrastructure to its users, you should, and the sales tax is regressive," he said. "It's way too high."
OTHER FUNDING
The other part of Hutchinson's $300 million-a-year highway plan is Act 416 of 2019, which the Legislature and the governor enacted in the 2019 regular session.
Act 416 - sponsored by Sen. Terry Rice, R-Waldron - created a wholesales sales tax on gasoline and diesel; increased registration fees on hybrid and motor vehicles; and diverted casino tax revenue beyond $31.2 million each fiscal year to the state Department of Transportation and guarantees the department a minimum of $35 million each fiscal year from the casino tax, the state's restricted reserve fund and other sources.
On Oct. 1, 2019, the state's excise tax on gasoline increased by 3 cents to 24.5 cents a gallon and the excise tax on diesel increased by 6 cents to 28.5 cents a gallon under Act
416.
That same day, the annual registration fees for electric vehicles increased by $200 per vehicle and for hybrid vehicles by $100 per vehicle. The current base registration fees are $17, $25 and $30, depending on the weight class of the vehicle.
State officials project that Act 416 would raise about $95 million a year more for the Transportation Department and about $13 million more a year apiece for cities and counties to spend on roads.
Since 2013, 31 states and the District of Columbia have enacted legislation to increase gas taxes, said Mick Bullock, a spokesman for the National Conference of State Legislatures.
Funding for the Arkansas highway system totaled about $1.6 billion in fiscal 2019, which ended June 30, 2019. About 47% came from the federal government and the other 53% came from the state, said Randy Ort, a spokesman for the Transportation Department.
SALES TAXES COMPARED
Arkansas has the ninth-highest state sales tax at 6.5% as of July 1, 2020, according to the Tax Foundation.
California's sales tax of 7.25% leads the nation. Mississippi, Tennessee, Indiana and Rhode Island are tied for second with a sales tax of 7%.
In the other surrounding states, Texas' sales tax is 6.25% to rank 13th; Oklahoma's 4.5% ranks 36th; Louisiana's 4.45% ranks 38th; and Missouri's 4.225% ranks 39th, the Tax Foundation reported.
Norris said Arkansas has the nation's second-highest average combined state and local sales tax rate at 9.53%, lagging only Tennessee's 9.55%, based on information from the Tax Foundation.
The combined sales tax among Arkansas' neighbors is: 9.52% in Louisiana to rank third; 8.95% in Oklahoma to rank sixth; 8.2% in Missouri to rank 13th; 8.19 % in Texas to rank 14th; and 7.07% in Mississippi to rank 22nd, the Tax Foundation reported.
"In reality, [Issue 1] is a new tax because on the effective date, the tax would drop from 6.5% to 6% without Issue 1," Norris said.
TAX CHANGES
Asked about tax opponents who argue the sales tax is regressive and too high and the state should explore other options, Hutchinson said people who are concerned about the sales tax being too high need to recognize Issue 1 wouldn't increase the state's sales tax.
"Over the last eight years, our Legislature, [then] Gov. [Mike] Beebe and myself have worked hard to eliminate the grocery tax on our sales and that's happened, so there has been some benefit to lower-income workers by reducing that sales tax burden on them," he said.
"And then secondly, we've also reduced our income tax," Hutchinson said. "We started at 7% and we are going to be down to 5.9% with the [top] individual income tax rate. We are managing our tax rate in Arkansas, so that we are reducing the burden, but then also allowing us to continue to invest in infrastructure, a unique opportunity for us."
SPONSOR'S OPPOSITION
In the 2011 regular session, Barnett and Sen. Bill Sample, R-Hot Springs, sponsored the joint resolution to refer to voters in the 2012 general election the proposed amendment to create the 0.5% sales tax that would last for a decade.
The proposal saw 58.2% vote for it and 41.8% vote against it, according to the secretary of state's website.
Barnett said in an interview last week that he is going to vote against Issue 1.
He said he made a commitment to the House of Representatives and Senate that the half-cent sales tax for highways "was a temporary 10-year 'sun-setted' tax."
Sample said Monday he didn't know Barnett opposed Issue 1.
"It's just hard for me to conceive that he would oppose this, as badly as it's needed," Sample said in an interview.
CAMPAIGN CONTRIBUTIONS
Through the end of September, The Vote for Roads, Vote for Issue 1 committee reported raising $2.15 million in contributions and spending $1.62 million, leaving a balance of $519,173.91 on Sept. 30.
The No Permanent Tax, No on Issue 1 committee's report for September wasn't available on the Arkansas Ethics Commission's website as as of early Monday evening.