Ark. grocers say penny tax cut won't boost sales

LITTLE ROCK While Jane Daniel says she's looking forward to paying less taxes on her groceries starting Wednesday, the Camden grocery store owner says she's not expecting the cut to boost her business.

"A penny is not going to help one way or the other," the owner of Jay's Country Store said. "I'm for any kind of tax cut, but it's just not going to help much."

Arkansas lawmakers voted this year to lower the state's sales tax on groceries from 3 cents to 2 cents per dollar, effective Wednesday. The tax cut was pushed by Gov. Mike Beebe, who was elected to office in 2006 on a pledge to phase out the grocery tax over time.

Unlike two years ago, when lawmakers approved cutting the tax in half from 6 cents to 3 cents, the state hasn't been spending weeks preparing grocers for the change. Then, state tax officials held seminars explaining which foods qualified for the lower tax and what constituted prepared food that's still taxed at the full rate.

Some grocers had complained then that the distinction would confuse consumers, but now they say they think they've adjusted to the differences.

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"It was really hard the last time because you have some things that are taxable and you have some things that aren't," said Linda Evans, owner of Linda's Grocery in Mayflower. "You've got to redo your cash register and reprogram it. It was a pain last time, and I'm sure it will be this time. Of course, we know a little bit more about it this time, so it won't be as hard."

Beebe said in an interview last week that he didn't push for the grocery tax cut as a way to help stimulate the state's economy. Instead, he said he's been pushing for the cut to eventually eliminate a tax he views as unfair and more of a burden for the poor than the wealthy.

The $40 million grocery tax cut was one of two major tax cuts that Beebe signed into law in March and will take effect when the new fiscal year starts Wednesday. Lawmakers also approved a cut in the tax manufacturers pay on utilities, a reduction that Beebe said could help stimulate the state's economy by making the state more attractive to new industries.

"The bigger thing is the reduction in the sales tax on groceries, but that's not designed to stimulate," Beebe told The Associated Press last week. "It's designed to make sure families have enough ability to be able to provide the essentials of life without being taxed on it."

Of the 45 states that levy a general sales tax, only 15 tax food to be eaten at home, according to the Federation of Tax Administrators.

Beebe said last week that he still wants to push for a further reduction in the tax and eventually eliminate it, except for a 1/8-cent sales tax for conservation that voters approved in 1996.

But Beebe said he doesn't plan on pushing for another cut in the tax next year, when lawmakers return to the Capitol for their first fiscal session. For that session, Beebe said he wants to focus on agency budgets, not tax changes. Under an amendment approved last year, lawmakers must meet annually instead of every other year and sessions in even-numbered years deal solely with budget-related issues.

The soonest Beebe would be able to push for another cut would be 2011, if he wins a second term next year. And that may depend on the state's economy. Though Arkansas is slated to end the fiscal year with a $300 million surplus, Beebe had to tap some of that money to help make up for expected shortfalls in next year's budget.

Beebe said he doesn't know how much of a tax cut he'll propose in the future.

"Whether we do it all in one bite ... or whether it'll take two bites is largely dependent on the economy," Beebe said.

Veronica Hall, who was loading her car with groceries at a Little Rock grocery store Monday, said she spends about $500 a month on groceries for herself and her family. A North Little Rock woman who works as a lunch aide at an elementary school, she said she looks forward to the cut but doesn't think she'll buy more groceries or spend the money on other items.

"I don't think I'll buy anything new, but with you how high food is, those pennies add up," Hall said.