Opinion

Don’t Get Tricked into Raising the Sales Tax Permanently

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Posted: Jul 25, 2020 12:01 AM
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Don’t Get Tricked into Raising the Sales Tax Permanently

Source: AP Photo/Mark Lennihan

On Election Day, Americans will cast their vote for President of the United States. While easily the most high-profile thing on the ballot, this is not the only important decision voters will be making. State politicians -- rather than reform government to cost less -- are angling for higher taxes.

In Arkansas, for example, voters will be asked if they want to write a permanent sales tax increase into the state constitution. If “YES” wins the vote, the people of Arkansas will see their state sales taxes hiked by about 9%, taking roughly $300 million a year away from residents and shoveling it to the Arkansas Department of Transportation (ARDOT). 

Back in 2012, special interests convinced voters to support a “temporary” 0.5 percentage point sales tax increase on the promise that it would be used for “roads and bridges.” Over the last several years, that ballot measure – now known as Amendment 91 in the state constitution – has given ARDOT about $2 billion in additional funding and, predictably, there is little to show for it.

Now, taxpayers are being asked to support another measure that would give even more of their hard-earned money to this unelected, unaccountable government agency. Issue 1, which will appear on the November 3rd ballot, would amend the state constitution to make the “temporary” sales tax hike – which took the state sales tax rate from 6% to 6.5% – permanent.

Proponents of the tax hike have been trying to downplay its magnitude by saying things like “it is only a half a percent” or “taxpayers are already paying it, so it is not really a tax increase.” Those claims are a terrible misrepresentation of the facts.

Under current law, the state sales tax rate is scheduled to drop from 6.5% back down to 6% “when there are no bonds outstanding to which tax collections are pledged as provided in this amendment.” This is expected to occur in 2023, meaning Arkansas taxpayers will very soon see a smaller sales tax bite on their purchases.

If Issue 1 is adopted, however, current law would change, and taxpayers would be stuck with the higher 6.5% rate. Permanently. This is, in fact, a tax hike, and not just a small one, as advocates of Issue 1 would like voters to think. Taking the rate from 6% to 6.5%, a 0.5 percentage point increase, is actually an 8.33% tax hike. That increase is much greater than “just half a percent.”

Before the 2012 “temporary” sales tax hike took effect (on July 1, 2013) Arkansans were already burdened with the 6th highest combined state and local sales tax rate in the country. A state sales tax rate of 6.5% means Arkansas will continue to fight with Louisiana and Tennessee (Tennessee is one of nine states that do not impose taxes on wage income) for the unwelcome distinction of highest combined state and local sales tax rate in the nation.

Arkansas taxpayers are already facing higher taxes at the pump thanks to Act 416, which recently imposed a wholesale sales tax on fuel. This past October, Arkansas’s excise tax on diesel increased by six cents to 28.5 cents per gallon and its excise tax on gas increased by three cents to 24.5 cents per gallon. It is likely that much of this “gas tax” money will be siphoned off to spending interests—not used to improve roads and bridges.

Politicians across the nation have a favorite trick: pass a “temporary” tax hike, then years later, when taxpayers are “used” to carrying this higher burden, announce it will be permanent. The politicians hope Arkansans have forgotten their lie that the tax hike would be “temporary.”

On Election Day, Arkansas taxpayers will have the opportunity to avoid the fate of Pennsylvanians, who are still stuck paying a “temporary” tax imposed after the Johnstown Flood of 1936. 

They can say NO. NO more lying Arkansans into higher taxes.

Grover Norquist is president of Americans for Tax Reform.