Get Ready for Shopping this Weekend: Arkansas State Sales Tax Holiday August 3-4 Only

Heads up everyone. Whether you have a child in school or not, you can purchase a multitude of items without paying sales tax for two days only: Saturday and Sunday, August 3-4, 2013. If you want best selection without a crowd, you can start at 12:01 a.m. on Saturday. The 48-hour “Sales Tax Holiday” ends at 11:59 p.m. Sunday, August 4.

This is the second year Arkansas has declared this sales tax holiday. Last year was highly successful and saved residents a considerable amount of money. I’m happy to tell you a little more here so you do not miss out on this opportunity.

The sales tax holiday is primarily meant for back-to-school supplies and clothing. However, the categories are so broad, people from all walks of life can avail themselves for two days of buying without sales tax added on.

All Arkansas retailers are required by law to observe the sales tax holiday.

Here’s a partial list of eligible purchases:

·         All the usual school supplies, including calculators and art supplies, without limit.

·         All clothing, footwear, underwear, coats and jackets, swimsuits, up to $100 per item.

·         Diapers, disposable and non-disposable.

·         Jewelry, handbags, briefcases, sunglasses, accessories, hair notions, cosmetics, up to $50 per item.

·         Wedding apparel, up to $100 per item.

Get your shopping lists prepared. This bonanza will not be back for a whole year!

Rules, lists of eligible and non-eligible items, and examples are available here:

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Impact Fees – How Much is Too Much?

Less than one year ago Fayetteville voters approved a ¼ of 1% sales tax increase to pay for $65.9 million in bonds for street improvement projects.

Now Fayetteville residents are being asked to vote at a special election April 10th on the question of whether to impose an impact fee on builders to provide additional funds to improve roads.

If the impact fee passes, the additional amounts charged builders will vary from $2,363 for a single family detached home, to $1,319 per room for a hotel/motel, and on up to $2,701 per 1,000 square feet of commercial or office space.

As usual, there is more than one point of view when looking at this problem.

Does it make sense that the builder should be charged for the infrastructure that his project would necessitate? It’s easy to say “Yes, that sounds logical.” But look a little deeper into the problem and you’ll see it is the buyer or renter that will ultimately pay the fee. Homes will cost more and rents will rise.

I’ve written previously about the lack of affordable housing in NW Arkansas as a whole and Fayetteville in particular. Adding another $2,363 to the cost of each home only makes homes less affordable.

Another issue is whether increasing the impact fees already in effect will deter businesses from locating in Fayetteville. That issue, too, can be argued two ways. Some say that businesses seeking to expand or move to Fayetteville will look at other areas where fees are lower or nonexistent, and this has already happened.

If businesses locate elsewhere, Fayetteville’s sales tax receipts will decrease accordingly. Keep in mind that sales tax is a principal source of revenue for city capital improvement and schools. There has already been a decrease in sales tax revenues in the last quarter of 2006.

Others say look at Bentonville. The impact fee for a single home in that city is $4,750 and the city is growing at a major pace.

The new impact fee will make Fayetteville’s the highest in NW Arkansas at $4,897. Springdale has no impact fees and has completed major improvements on their artery streets, as well as neighborhood streets, by sales taxes voted by residents and by bond issues. Rogers charges a $2600 “sewer and water hook-up” fee, which some call a disguised impact fee and which has been challenged in court.

However, the bottom line here is that developers in Fayetteville already pay impact fees for new-construction, which are passed on to the consumers of these homes. Developers also are required to install (at their own expense) new roads and other infrastructure items, such as water lines, sewer lines, etc. An additional road impact fee will basically be another tax, not just on developers and builders of new areas but on everyone who lives in Fayetteville. It’s a case of double taxation, despite what those in favor of the measure say. And it puts the burden of street improvements for older areas of Fayetteville on the developers of new areas. Is that fair?

Ultimately, money for additional (and much needed) street improvements will have to come from somewhere. If taxes need to be increased, so be it—let the voters decide as they have in the past. But let’s be honest.

I have a great concern that Election Day is just around the corner, and I don’t believe the majority of voters have taken an interest in the matter at hand. I encourage everyone to become informed and vote his or her conscience. I personally am going to vote NO.

Here are some links for further information:

http://www.nwanews.com/nwat/News/51665/

http://www.nwaonline.net/articles/2007/03/25/news/032607fzroadfees.txt

http://www.nwanews.com/nwat/News/51598/

http://www.nwanews.com/adg/News/186156/

http://www.nwanews.com/nwat/News/51075

http://www.nwanews.com/adg/Special/182334

http://www.nwanews.com/nwat/News/51559

http://www.citizens4fayetteville.org/

http://voteforfayetteville.org/

More Tax Cuts for Arkansans

In addition to the state’s largest tax cut in history (reducing the sales tax on groceries by 50%) more good news arrived this week on a variety of tax cuts. These measures are designed to boost the economy, make Arkansas more attractive to business and retirees who carefully study tax implications before moving to a new state, and help many of our most vulnerable residents.

Increase in Homestead Tax Credit Becomes Law

An increase of $50 in the homestead tax credit was signed into law. Currently, homeowners in Arkansas are eligible for a credit of up to $300 on taxes for their principal residence. The new maximum credit of $350 will become effective with the 2007 assessment year and will appear on property tax bills in 2008.

There are approximately 696,000 homesteads in Arkansas and it is expected that about 538,000 homesteads will we benefit from some or all of the additional $50 tax credit.

The homestead tax credits are financed by a one-half percent sales tax collected by the state, which, in turn, reimburses the counties for the property taxes they did not collect because of the tax credits. According to the state finance department, a $60 million balance was on hand at the end of last year. Governor Beebe has stated, “We were able to determine that we could conservatively and reasonably [increase the credit] and still be sound going into the future.”

Income Tax Cuts for Working Poor Move Closer

It looks like state income tax cuts for low-income people are on the horizon. The House tax committee has endorsed a bill that would exempt approximately 62,000 Arkansans from paying state income tax.

In its current form, the bill would eliminate the following groups from state income tax:

Single people with an annual gross income tax (AGI) of less than $10,200;
Married couples filing jointly with less than two dependents and AGI less than $17,200;
Married couples filing jointly with two or more dependents and AGI less than $20,700;
Head of Household filers with AGI less than $13,700.

Arkansans with income above the federal poverty level but less than 33% above it would receive tax credits to partially offset state income tax. The state finance department estimates 89,000 taxpayers would be eligible for these credits.

This is a step in the right direction. Just imagine a family of four (or more) trying to make ends meet on less than $20,700 a year. If this bill becomes law, it would provide tax relief for people in low-paying jobs and cut the workload at the Department of Revenue at the same time.

A Bill Advances to Equalize Taxes on Military Officers and Enlisted Personnel

Under existing law, enlisted military personnel do not pay state income tax on the first $9,000 of pay. However, officers are taxed on all military pay over $6,000.
The $3,000 difference seems strange to me and apparently to Rep. Sandra Prater, D-Jacksonville, as well. She has introduced a bill that would make the first $9,000 of military pay exempt from state income tax, regardless of rank. The bill passed the House and Senate and has been sent to the Governor.

Reducing Sales Taxes on Utilities Paid by Manufacturers

Bills to reduce the sales tax that manufacturers pay on natural gas and electricity seem to be sailing through the legislature. If signed into law as expected, the sales tax paid on utilities used by manufacturers would decrease from 6% to 4.5% on July 1, 2007. Another scheduled decrease would drop the tax to 4% on July 1, 2008.

State officials say the decreases will reduce state revenue by $20.2 million next fiscal year and $30.5 million the next year.

Perhaps your first reaction to this news might be “What about the taxes I pay on utilities? I’d like to pay less, too.” But the situation bears a closer look.

Arkansas needs to retain the industry it has while at the same time it must recruit more economic development to the state. The 6% sales tax on utilities puts Arkansas at a disadvantage. Most of the neighboring states charge manufacturers lower or even zero sales tax on utilities.

The Arkansas Chamber of Commerce is a strong advocate of this tax cut. If it passes, Arkansas will be in a more favorable position to recruit new employers. Arkansas is still trying to land a huge Toyota plant and there are other possibilities on the horizon.

I say go for it - I’m tired of hearing about the ones that get away, especially now with the recent loss of manufacturing jobs in this area.

For more information on these subjects:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/22/topics/assembly07/022207lrlegpropertytax.txt

http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=182003

http://www.nwanews.com/story.php?paper=adg§ion=National&storyid=182089

New Tax Cut Benefits Everyone in Arkansas

Effective July 1, 2007, the state sales tax on groceries will be cut in half – from 6% to 3%. The details are still being worked out but this much is definite: When you buy groceries for human consumption, you will be taxed 3% less than the current rate.

The average savings is estimated to be at least $200.00 per year for a family of four.

Other items you buy at the grocery store will continue be taxed at 6%. That includes such things as paper products, cleaning supplies, pet food, diapers, personal grooming items and miscellaneous household supplies.

The reduction in sales tax is possible because the State of Arkansas has a huge surplus on hand and that surplus seems to be increasing each month. One recent estimate is an $844 million surplus in the state’s coffers by June 30, 2007.

There are innumerable ways to spend the surplus – roads, education, tax rebates and reductions, health care, ad infinitum.

But here is the plain truth: No tax is more regressive and repugnant than a tax on food! Everyone has to eat and levying a sales tax on food simply means that the lower a person’s income, the higher the percentage of their income they must spend in order to feed their families.

I urge the legislature and Governor Beebe to eliminate the remaining 3% tax on groceries in the near future. But that might be hard--it would have been better not to tax food in the first place, as other states have done. But this tax cut is a step in the right direction.

Note: County and city sales taxes remain unchanged. It’s possible some local governments may find it possible to lower their tax rates in the future but they remain in place for now. For instance, Fayetteville, Springdale, Rogers, and Bentonville all have sales tax rates of 2%. In addition to the city taxes, Benton County assesses an additional 1% while Washington County’s sales tax rate is an additional 1.25%.

Please watch for an additional article I expect to write soon on other tax cuts already signed into law or under consideration in the legislature.

For more information:

http://www.nwanews.com/adg/National/182567/

http://www.nwaonline.net/articles/2007/02/16/topics/assembly07/021607lrleggrocerytax.txt

http://www.arkansas.gov/dfa/excise_tax_v2/et_su_local.html

Fayetteville’s Sales Tax Rate Increase and Extension

What do sewers, roads, and trails have in common? You guessed it, money! Lots of money.

Fayetteville voters went to the polls September 12th and voted to increase city sales tax by ¼ of 1%. They also voted to extend of the number of years before an existing ¾ of 1% sales tax will end. Thus, starting January 1, 2007, state, county and city sales tax on most purchases in Fayetteville will total 9¼% for the next 12 years. Hotel, motel and restaurant tax is an additional 2% on purchases of that type.

For those who haven’t lived here for several years, here is a brief summary of where we are on the sewer project, and how we got here-----

Back in the 1990s, city leaders realized that unprecedented growth would necessitate an improved wastewater treatment system. In 2000, city officials estimated $60 million to $90 million would be needed to cover sewer plant improvements.

In 2001, city administrators estimated $125 million was needed for the sewer project. Voters agreed and passed an increase of ¾ of 1% sales tax. The project was expected to be complete by September 2006. If everything went as planned, the bonds would have been paid off in 2013 and the increased sales tax increase would have ceased.

Unfortunately, things didn’t go as planned. By 2003, estimates had escalated to $140 million and completion was scheduled for 2007.

By 2005, fingers started pointing in all directions. Virtually everyone and everything imaginable were blamed for the cost overruns and delays. The engineers and designers, project directors, mayor, city staff, hurricanes Katrina and Rita, war in Iraq, China’s increasing demands for raw materials and energy – all were blamed. Some said it was no one’s fault - it was just that the original plan and cost estimates were “overly optimistic.”

Fast forward to 2006. Voters were told they would have to pay to complete the sewer project one way or another. They had two choices: (1) vote to increase and extend the sales tax or (2) pay considerably higher sewer fees each month for a much longer number of years.

Voters (the ones who vote anyway) are intelligent people. It was easy to see that approving the sales tax was the better choice. Everyone visiting the city would help residents pay for the sewers. Each time a visitor patronized a restaurant, spent a night at a motel, bought a gift, or shopped for groceries, money would roll in to the city coffers.

Again, I am saddened by the thousands of registered voters who did not take the time to make their voices heard. Roughly 83% of voters did NOT vote! But, I digress. Back to the subject of sewers.

The increase in sales tax revenue will be used to (hopefully) complete the sewer project. I have to say “hopefully” because at this point, no one can be certain about total costs. Some portions of the project have not even gone out to bid.

In addition to the $42 million sales tax increase that will be used to repay sewer bonds, voters approved additional expenditures for street improvements and trails. $66 million will help widen roads and reconfigure some extremely congested intersections. It will take several years for the planned improvements to be completed and I say the sooner the better.

And lastly, voters approved spending $2 million to improve hiking/biking trails. This is another example of what gives Fayetteville high rankings for quality of life.

For more information:

http://www.nwaonline.net/articles/2006/09/12/columns/brenda_blagg/01blagg.txt
http://www.nwanews.com/story.php?paper=adg§ion=News&storyid=166459

Arkansas Has Budget Surplus of $402 Million

The bad news is: Arkansas has a reputation as a relatively poor state with a long list of needs from roads, sewers, and infrastructure in general to improvements in education, helping the needy, and everything in-between.

The good news is: Arkansas has a budget surplus of more than $402 million for the fiscal year ended June 30, 2006. As you can imagine, everyone wants a piece of the pie.

Many of the ideas are worthy of consideration. Using part of the surplus to create a “rainy day fund” is certainly an excellent idea. Just because income exceeded expenses this year doesn’t necessarily mean next year will as rosy.

Governor Mike Huckabee believes a good portion of the surplus should be refunded to taxpayers. The governor says the refund could be handled in various ways: state income tax reduction, reducing or eliminating the sales tax on food, or even a direct rebate to taxpayers. So far the legislature has been in no hurry to do anything.

Arkansas has become increasingly dependent on the sales tax. Arkansans pay sales tax on just about everything except medical care and prescriptions. The bare essentials - food, clothing, and utilities - are taxed by the state, county, and city. Add those taxes together and you will quickly see that cities such as Fayetteville and Springdale have sales tax rates in excess of 9%.

As we all know, the sales tax is regressive. Poor people need essentials just as much as their more affluent neighbors but they have to pay a proportionately higher percentage of their income for them.

I’ve also heard talk about eliminating the sales tax that manufacturers pay on utilities. Most states do not have a similar tax so this makes Arkansas less attractive to manufacturers who may be considering a move.

Education is another high priority. In recent years, we’ve spent a lot of money for improvements from kindergarten through university levels but capital improvements have been falling through the cracks. It’s reasonable to assume the entire surplus could be spent for education without fulfilling every need.

Other ideas also have merit, especially for NW Arkansas: infrastructure and affordable housing. I have written previously about both subjects but I can’t say it too often. NW Arkansas is in gridlock. New roads, widening of existing roads, toll roads, overpasses, bypasses, etc., no matter what you call it, we need to build it. Large projects such as the Highway 412 bypass are only dreams at this point. Funding does not exist to even buy the land.

NW Arkansas has a growing population of homeless people and affordable housing is practically non-existent. Part of the surplus could be used to help feed and train people so they can get jobs. Then help them with down payments and/or subsidized interest rates to get them off the streets and into housing.

As I understand it, the state used to give turnback funds to the cities, but they have not been awarded since 1986, when cities were allowed to enact local sales taxes to add on to the state sales tax.

Perhaps it is time to turn back some or all or the surplus to the cities to use as they see fit. They know better than the state what is needed at the local level.

While I know it cannot happen, I would love to see the entire surplus sent to NW Arkansas. NW Arkansas’ booming economy helps the entire state. We pay a proportionately higher percentage of taxes to the state than the other areas. We need help with infrastructure now if our economy is to continue expanding.

For more information:

http://www.nwaonline.net/articles/2006/07/06/news/05lrrevenuereport.txt

http://www.nwaonline.net/articles/2006/07/08/news/03lrhuck.txt

http://nwanews.com/bcdr/News/33242/