Arkansas lawmakers seek to eliminate state grocery tax with new legislation

Yahoo

04-03-2025

Gov. Sarah Huckabee Sanders announces legislation to eliminate the state's grocery tax during a press conference at the Arkansas Capitol on March 4, 2025. (Screenshot from livestream)
Arkansas' governor on Tuesday announced legislation to repeal the state grocery tax and expand liability protections for food banks and their donors.
Access to food has become a challenge in recent years for many Americans due to inflation and the rising cost of groceries.
Cave Springs Republicans Sen. Bart Hester and Rep. Kendon Underwood are sponsoring the Grocery Tax Relief Act. The bill will eliminate the state grocery tax, but have no impact on county and municipal grocery taxes, according to a press release.
Arkansas joins other states like Missouri that are considering eliminating taxes on groceries, and Illinois, which last year approved legislation to end its grocery tax at the start of 2026. Of the ten states that tax groceries, Arkansas has the lowest rate at 0.125%, according to an AARP report.
Arkansas governor lays out legislative priorities in State of the State
The Grocery Tax Relief Act follows through on the promise Gov. Sarah Huckabee Sanders made during January's State of the State address to eliminate the state's grocery tax. Both pieces of legislation announced Tuesday will address the cost and availability of food in Arkansas, Sanders said during a press conference.
'For too many families the grocery bill went up while their paychecks stayed the same, and for those families at the bottom of the income ladder, that means missed meals and empty dinner tables,' she said. '…we're getting rid of Arkansas' most regressive tax and giving a helping hand to Arkansans who need it the most.'
If approved by lawmakers, the Grocery Tax Relief Act would go into effect Jan. 1, 2026, which Finance and Administration Secretary Jim Hudson said would give merchants time to reprogram their systems. Officials project the law would have an estimated annual impact of $10.9 million beginning in fiscal year 2027, the first full year the act would be in effect.
The loss in revenue from the elimination of the tax would impact the Arkansas Game and Fish Commission, Arkansas State Parks, Arkansas Heritage Commission and Keep Arkansas Beautiful Commission, which were designated 0.125% of the state's general sales tax when voters approved Amendment 75 to the state Constitution in 1996.
Because Amendment 75 references a section of Arkansas code, state officials said they will be able to remove certain foods as taxable items from the code instead of requiring voters to pass another constitutional amendment to eliminate the state's grocery tax.
According to DFA spokesman Scott Hardin, the annual loss of revenue from the eliminated grocery tax would affect the following programs:
Constitutional Officers Fund – $110,000
State Central Services – $220,000
Game Protection Fund (Game & Fish) – $4.77 million
Parks & Tourism Fund – $4.77 million
Department of Heritage Fund – $950,000
Keep Arkansas Beautiful Fund – $110,000
State organizations were made aware of the effects of the grocery tax bill on their budgets and will be able to manage the change in revenue, Sanders said.
'These agencies have very healthy, strong budgets, [I'm] very confident in their ability to continue to do what we've been doing, which is breaking tourism records,' she said.
Outdoor recreation is a $7.3 billion industry for Arkansas that supports more than 68,000 jobs and generates nearly $2 billion in tax revenue, according to a new Heartland Forward report.
The Good Neighbor Act is sponsored by Sen. Breanne Davis, R-Russellville, and Rep. Chad Puryear, R-Hindsville. The bill expands liability protections to food banks and their donors, including hotels, restaurants, farmers, hospitals, schools and religious organizations, according to a press release.
New report ranks Arkansas' food insecurity rate worst in the U.S.
At a rate of nearly 19%, Arkansas has the highest prevalence of food insecurity in the nation, according to a 2024 U.S. Department of Agriculture report.
Arkansas has taken steps to address food insecurity for its residents, including opting into the new federal Summer Electronic Benefit Transfer (EBT) program, which provides $120 in food benefits for children who qualify for the federal free or reduced-price meal program. About 260,000 Arkansans benefited during the inaugural year of the program, which will again be available to families this summer.
State lawmakers also passed a 2023 bill to cover the co-payment for low-income students who qualify for reduced-price meals, and approved a new law last month that will provide free school breakfast to all students, regardless of their eligibility for free or reduced-price meals.
Act 123 of 2025 will use tax revenue from the state's medical marijuana program to fund the Summer EBT program and the free lunch and breakfast initiatives.
Neither the Grocery Tax Relief Act nor the Good Neighbor Act had been filed as of mid-afternoon Tuesday.
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