Several tax rates in Arkansas will drop Friday due to new laws that go into effect on July 1, the beginning of fiscal 2012. The tax bills were included in the 602 measures passed by the General Assembly in 2011.

The biggest revenue reduction comes from Act 755, which lowers the sales tax on groceries to 1.5% from the current 2%. It is expected to reduce revenues by $20.8 million in fiscal 2012 and $23.4 million in fiscal 2013.

Groceries were subject to the full 6% state sales tax when Gov. Mike Beebe was elected in 2006. He campaigned on a promise to reduce that tax, and to eventually eliminate it.

The grocery tax was lowered to 3% in Beebe’s first term, which cut revenues by $113.5 million in fiscal 2007, and then to 2% in 2009.

Beebe said the tax cutting will continue until the sales tax on groceries is wiped out.

“We are going to remove this thing incrementally, as we can afford it, and to keep that momentum going,” he said. “It is important to keep whittling away at it. And we are not through.”

The Department of Finance and Administration said revenues have fallen a total of $553 million as a result of the lowering of the tax rate. The first reduction went into effect in July 2007.

Act 754 lowers state taxes on natural gas and electricity used in manufacturing. The measure reduces the excise tax on energy as well as the tax on natural gas burned in high-efficiency electrical generating units.

The measure is expected to lower revenues by $5.3 million next year, $10.2 million in fiscal 2013, and $16.9 million in fiscal 2014.

Other tax measures adopted by the 88th General Assembly raised the sales tax exemption on used cars to $4,000 from $2,500, which will cut revenues by $2.5 million next year, and established a sales tax holiday in early August on clothing and school supplies.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.