Abby Anderson, communications director for Democratic candidate for governor Jared Henderson, got in touch to make clear that Henderson “strongly supports…consideration for creating a state earned income tax credit, acknowledging the targeted benefits it would yield for Arkansas families.” That conversation, however, should happen entirely separately from the grocery tax, she said. In Henderson’s view, the idea of raising the grocery tax shouldn’t be on the table at all.
I wrote at length this week about the sales tax exemption for groceries, and the efforts on the legislative task force on taxes to tie the policy to an income tax credit that would provide targeted tax relief for low-income Arkansans. Anderson’s comments come in response to an item on the blog yesterday that noted that Henderson’s previous comments, while offering a full-throated defense of the grocery tax, appeared lukewarm on a tax credit.
Raising the grocery tax would, in addition to being extremely unpopular, disproportionately hurt the poor, who pay a higher percentage of their income to regressive taxes like a sales tax. A targeted tax credit, meanwhile, would be the most efficient way to deliver the most help to those who need it most, and Democrats have fought to enact a credit such as the earned income tax credit (EITC) for years, only to be stymied by Republicans in the legislature. Some Republicans on the task force showed some openness to such a tax credit in the context of raising the grocery tax. This was a perverse choice: Republicans were offering relief to the poor only if it was squeezed out of phasing out part of an entirely different policy that helps lower-income Arkansans — because they’re focused on making the math work for a mammoth tax cut for the rich.
However, some liberal advocates and legislators were forced to consider whether such a swap could benefit those most in need on net (a tax credit can be designed to go directly into the pockets of lower-income Arkansans, whereas the grocery tax applies to all incomes, so a good portion of the revenues it soaks up end up benefiting wealthy grocery shoppers). That’s a complicated policy issue, but the politics make it moot: The grocery tax exemption is a good, simple, established, popular policy — and one that liberals fought for years to enact. Lowering the grocery tax was a signature issue of Gov. Mike Beebe, phased in over the last decade with the tax slated to drop all the way to 0.125 percent next year, saving almost six cents on the dollar for grocery shoppers. Democrats obviously don’t want to suddenly unwind that progress. And the grocery tax is popular among a much broader base of people. Retired people, for example, benefit from lower sales taxes and are among the most reliable voters. The grocery stores themselves would flex their muscle if a take hike was on the table. As far as political messaging goes, it’s hard to beat: Everyone buys groceries.
Under pressure from primary opponent Jan Morgan, some Republican lawmakers, and Henderson, Hutchinson sent a letter to the task force expressing strong opposition to any raise to the grocery tax, which probably means the idea is DOA. On its own, that’s a win for low- and middle-income Arkansans, but it must be viewed in the broader context of Hutchinson and the task force’s tax cut plan, which will proceed full speed ahead toward the governor’s stated goal: Enacting the largest tax cut in the state’s history in the 2019 session, with every penny going to the state’s highest earners. That will sap huge amounts of revenues, meaning inevitable cuts in public investments that will disproportionally harm those at the bottom of the income scale. My sad prediction is that the task force will not recommend any new relief to those low-income Arkansans. A tax credit, which would provide much more help to those at the bottom (and cost less) than Hutchinson’s lower-income tax cuts passed last year, will likely be blocked once again by Republicans scrambling to find enough revenue for a massive giveaway for the rich.
Under the circumstances, my hope would be that Democrats would fight for a tax credit targeted for struggling Arkansans as hard as they would fight to keep the grocery sales tax exemption. Yes, it’s much harder political work to advocate for spending that all goes directly into the pockets of those at the bottom of the income scale. But this is a fight worth having, given what’s coming.
In Henderson’s original statement on the grocery tax, he unfortunately chose to unnecessarily disparage the income tax credit idea as making “little difference at the register for families with a tight budget.” His campaign followed up yesterday to offer the following clarification, making the important point that there is no reason for these two policies to be in competition with each other:
Jared opposes any consideration of an increase to the sales tax on groceries, but strongly supports separate consideration for creating a state earned income tax credit, acknowledging the targeted benefits it would yield for Arkansas families.
Jared understands that eliminating the sales tax exemption on groceries would be a serious hit at the register for families living paycheck-to-paycheck. He does not believe the elimination of the sales tax exemption, which provides more immediate relief to all Arkansans, should be a trade-off for an EITC as it would leave so many who need help the most without any relief at all.