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We are going to pay for long-overdue highway maintenance in Arkansas either by cutting off funding for essentials like schools and social workers, or by raising taxes. The most reasonable solution — a modest increase to the gasoline tax at a time of historically low fuel prices — hasn't gotten much serious consideration at the state Capitol, in large part because the governor and many legislators have ruled it out.
Yet, some of those same lawmakers who insisted on looking at only "revenue neutral" ideas for highway funding are suddenly considering an increase in the grocery tax as a possibility. Short of having a literal poor tax, a grocery tax increase is the least ethical method of paying for roads.
The grocery tax is hardest on low-income families because they spend a much larger share of their income on food that is prepared at home when compared to higher-income households. Working families who make less than $21,000 a year were left out of the 2015 personal income tax cuts in Arkansas that benefited every other income group. Their only hope for a tax break is a scheduled decrease in the grocery tax from 1.5 cents on the dollar to 1/8 cent on the dollar, potentially saving the average family roughly $125 a year.
Some legislators want to revoke the tax decrease, leave the grocery tax at 1.5 percent and send the resulting higher revenues to highways instead of finally giving a break to working families. Make no mistake: Preventing the sunset of the grocery tax is still a tax increase. That's because the grocery tax phase-out is already in the law. No revenue-neutral diehard can honestly claim that reinstating the full grocery tax in future years is anything but a tax increase. It is egregious to give millions of dollars in tax breaks to the wealthy in capital gains kickbacks, pass a costly income tax cut for middle- and upper-income Arkansans, and then turn around and ask the only families who were completely left out of the last round of tax cuts to chip in a disproportionate share of their incomes for highways.
Increasing the fuel tax is a much better deal for low-income families than taxing groceries: A lot of low-income workers in Arkansas don't have a car, but they all eat. If you are on a tight budget, a fuel tax isn't going to hurt as much as a tax on staple foods.
Nonetheless, higher gas taxes still burden poor households. That is why the fair and reasonable solution is to bump up fuel taxes and pair that with a tax credit for working families. A state Earned Income Tax Credit (EITC) would help balance out the cost of the tax increase for low-income working families without eclipsing the major revenue gains to the state.
Unless we plan on restoring the 1.5 percent grocery tax and piling a bigger burden on low-income working families year after year, there is no way for the grocery tax proposal to keep up with growing highway needs. The long-term, common-sense revenue solution is a modernized fuel tax.
A 2.5-cent fuel tax increase (indexed to keep pace with inflation and gains in vehicle fuel efficiency) would generate more revenue than the governor's recent highway plan at a cost of only $25 a year to middle-income Arkansans in the first year. Lower income people would pay even less on average. Without a smart fuel tax change, we will either pay for highways by picking the pockets of the most vulnerable families in our state, or by cutting funds from pre-K, child welfare programs and other services that assist those same families.
Eleanor Wheeler is a senior policy analyst for Arkansas Advocates for Children and Families.
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