Leader Blues

Tuesday, November 18, 2008

EDITORIAL >>Beebe’s grocery tax

It is scarcely wise to second-guess Gov. Mike Beebe on budget matters. He was the acknowledged master of the budget for 20 years in the legislature, and his tight budgets have continued to produce treasury surpluses in the midst of a troubled economy.

Still, we wonder about Beebe’s up-front commitment to cut the sales taxes on groceries another penny next year, the second payment on his promise to shed the grocery tax as quickly as economic conditions permitted.

The reduction, assuming the legislature adopts it, will move the tax to 2 percent. He can take it down to one-eighth of 1 percent, which is the recreation levy that Mike Huckabee installed in the state Constitution.

While Arkansas tax collections, unlike nearly all the rest of the country, remain fairly stable, Beebe ought to know that it will not last. The state treasury will not escape the pain of a deep recession that is settling across the land — indeed, the world.

By next summer, Beebe will need that $40 million or so that the penny of sales tax would produce.

The option will be the painful curtailment of services like medical care for the poor.

Beebe is right that the grocery tax is regressive, like the state’s whole tax structure.

The grocery tax actually is now no more regressive than the sales tax generally because some 300,000 of the state’s poorest acquire more of their food with food stamps or under another of the federal nutrition programs that exclude the sales tax.

It would be better to provide a fundable income tax rebate to low-income families, but the legislature has refused that option as recently as 2007.

We have another solution for the governor. He can reduce the tax on groceries and shore up revenue for hard times at the same time. He can ask the legislature to close one of the worst loopholes in the tax code by requiring multistate corporations to file unitary income tax returns. They duck taxes on their Arkansas profits by hiding their income in passive subsidiaries postofficed in tax-free states like Delaware and Nevada.

Beebe can satisfy his compassionate and practical impulses simultaneously, the essence of good governing.

—Ernie Dumas