January 11, 2007 - Posted at 5:12 p.m. CST
JONESBORO, AR -- It's a tax you pay every time you pick up milk and bread in Arkansas, the grocery tax. But that money you fork out could soon be back in your pocket as the state moves towards eliminating this tax.
It was a major part of Governor Beebe's campaign and a big part of his state of the state address.
"We have a moral charge to rid our state of its most regressive tax...the state sales tax on food," said Governor Beebe during his State of the State address.
By definition, a regressive tax is one that places a higher burden on those with lower incomes. A rich family of four and a poor family of four will pay a similar amount of taxes over a year span on groceries. With Arkansas' budget surplus the governor feels now is the time to eliminate this uneven tax.
"I will ask you to end the grocery tax with a phase out that begins now, with a 50% cut, a three cent cut now," said the Governor during his speech on Wednesday.
Eliminating the grocery tax will help Arkansas families both rich and poor because it will put more money in their pockets. Money they can then reinvest in their local economies.
ASU Economist Dr. Dan Marburger agrees, "Certainly most people spend this money where they live, so most of this money that will be saved will be spent here in Arkansas."
Opponents to the issue believe the budget surplus should go towards a one time tax break. However, Marburger says that wouldn't have the same long term positive effect on Arkansas' economy.
"When people know something is permanent then they make permanent changes to their spending habits," said Marburger.
He feels there is only one real downside to eliminating this tax.
"Right now we have a tax surplus, if the economy slows down we get into a recession tax revenues will fall and we could always be in a position of saying we need more tax money but we got rid of the grocery tax. Once we get rid of the grocery tax there is no way it will ever come back," said Marburger.