House expected to go slow on grocery tax bill

LITTLE ROCK The state Senate is expected to make quick work this week of a proposed 1-cent reduction in the state sales tax on groceries.

But the measure likely will face slow going in the House until the chamber decides a proposed 56-cents a pack increase in the cigarette tax, legislative leaders say.

Lawmakers are trying to come to grips with raising and cutting taxes simultaneously the top two items in Gov. Mike Beebe's legislative package in the midst of a national recession.

Adding to the pressure was news last week that state's unemployment rose to 6.2 percent in December, a full percentage point below the national rate but five-tenths of a percentage point higher than the month before. Also, news of layoffs continued Target announced plans to close its distribution center in Maumelle, where 500 work.

"I don't think there's quite the hurry on the House end to deal with the grocery tax at this point as there is the cigarette tax, because that opens up some other things in the budget," said Rep. John Lowery, D-El Dorado, chairman of the House Revenue and Taxation Committee.

Lowery said the grocery tax cut has a better chance of getting through because it takes simple majority to pass. The tobacco tax requires a three-fourths majority and could face some difficulty, he said.

Senate Bill 88 by Sen. Bobby Glover, D-Carlisle, which would cut the grocery tax by a penny, is to be considered Wednesday in the Senate Revenue and Taxation Committee.

Glover said last week he expects the committee's endorsement and quick passage in the Senate, where 27 of the 35 members are co-sponsors.

"I don't think there will be any trouble at all," Glover said.

Legislative approval of the measure would keep Beebe on track to fulfill his 2006 campaign promise to eliminate the grocery tax altogether. He and the Legislature halved the levy in 2007, from 6 percent to 3 percent.

Cutting the food tax another penny would take about $30 million a year from the state treasury, a loss that has some lawmakers, particularly in the House, concerned because of the state's tight budget and the nation's struggling economy.

Last week, Rep. Gregg Reep, D-Warren, filed House Bill 1204, which would raise the cigarette tax by 56 cents a pack. Along with a small tax hike on smokeless tobacco, the increases would generate about $88 million to be used to pay for a new statewide trauma system and a variety of other health programs.

A day later, a group of Republicans filed an alternative. HB 1238 by Rep. Ed Garner, R-Maumelle, would generate about $27 million through fee increases on a variety of court fines and divert a portion of the tax on insurance premiums the states now collects to fund only the trauma system.

Garner has said Beebe piled on other programs, such as funding for mental health programs and a proposed state medical school campus in Fayetteville a favorite of Northwest Arkansas Republicans to win political support for the cigarette tax increase.

The Maumelle lawmaker said he and other Republicans don't think raising taxes while the economy is struggling is a good idea.

"There's always an argument against raising taxes, but there is an increasingly powerful argument against raising tax during difficult economic times," added Rep. Dan Greenberg, R-Little Rock.

On Tuesday, former House Majority Leader Dick Armey, head of the conservative anti-tax group FreedomWorks, is scheduled to rally opponents of the cigarette tax increase at the state Capitol.

A day later, the House Rules Committee is to take up the cigarette tax hike bill, and House Speaker Robbie Wills, D-Conway, said the measure could come before the full House as early as Thursday.

Lowery said the House tax panel likely will hold up debate on the Senate grocery tax bill until HB 1204 is resolved.

"If it passes, it opens up some (funding) opportunities (for programs) that we may have had to fund from other revenue sources," Lowery said.

The package includes money for cancer research, Medicaid and $3 million to operate a Fayetteville satellite campus of the University of Arkansas for Medical Sciences.

"We need to be more patient, move patiently and slowly," Lowery said.

The House tax panel has already agreed to defer consideration of all tax exemption proposals until late in the session after the administration releases a new state revenue forecast for the next two years.

The governor has said it does not matter to him which of his tax proposals the House considers first. Reep also said it did not matter to him, either, but he added two measures are completely separate issues.

Rep. Steve Harrelson, D-Texarkana, the House majority leader, said the House should move quickly on the grocery tax.

"I know that some of the leadership would like to wait until we see some more monthly revenue reports and how some of the other budget items shake out in the session," Harrelson said. "But I believe that ... the fact that we've built up a surplus continually for the last several years, it's a good indication that we can cut the grocery tax by a penny and still have the ability to fix the rest of the state budget for the next biennium."