Sales Tax Exemption Gimmicks Mask High State Income Taxes

By Caleb Taylor

Arkansas should consider ending its counterproductive tax-exemptions, and instead lower income taxes, according to ACRE Scholar and UCA Assistant Professor of Economics Dr. Jeremy Hopedahl.

Horpedahl discussed the latest tax-policy news on Capitol View this Sunday with Jessi Turnure, KARK Political Correspondent.

Topics included the grocery tax exemption, back-to-school sales tax holidays, and other sales tax exemptions Arkansas Legislative Tax Reform and Relief Task Force is considering eliminating or reforming. Horpedahl suggested members consider alternatives to these programs such as earned income tax credits or sales tax credits that would offer low-income consumers relief in a targeted manner.  The additional revenue from eliminating the current sales tax exemptions could be used to shift tax burdens away from more economically harmful taxes like income taxes. This increases individual choice and economic growth as well as promoting responsible government budgeting.

The grocery tax exemption has an annual negative effect on state general revenue of approximately $191 million. It is by far the largest sales tax exemption the task force is considering changing. The back-to-school sales tax holiday has an annual negative effect on state general revenue of approximately $1.8 million.

Horpedahl is a co-author with Tax Foundation experts of  Arkansas: The Road Map To Tax Reform, about how to make the state’s tax code fairer and more competitive.

For more about ACRE’s work, check out our other research on taxes and spending.

You can watch Horpedahl’s full Capitol View interview with Turnure here.

Capitol View is a statewide political talk show that airs at 8:30 a.m. on Sundays and is available to more than 2.5 million households in the television markets of Little Rock, Ft. Smith-Fayetteville, Memphis, Monroe-El Dorado, Shreveport-Texarkana and Springfield.