08-04-2025
Bill to remove excise tax on soft drinks, impact Medicaid funding, fails in house
LITTLE ROCK, Ark. – Removing the excise tax on soft drinks in Arkansas was debated at the state capitol Monday.
Rep. David Ray (R-Maumelle) is leading the legislation and said the excise tax is burdening small businesses and is essentially double taxation because of sales tax.
'I've talked to some fast-food restaurant owners that tell me they pay over $1,000 a month in soda tax, just in the soda tax, so what you're doing is you're allowing those businesses to hire more workers, pay overtime to their employees,' Ray said.
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The revenue is one of the avenues for funding the Medicaid trust fund, which provides about $40 million a year.
Peter Gess with Arkansas Advocates for Children and Families said that with Medicaid funding uncertainty at the federal level, it is now a bad time to remove this tax.'While it is true that any sort of tax on a food product or soda is regressive, meaning that it hurts people with a low income, more than it does people that have more money, the real problem with repealing this is that it's getting rid of a dedicated source to the Medicaid program trust fund,' Gess said.
The bill outlines a phase-out of the tax over at least 5 years.'The only way it would be phased out is if certain revenue triggers are met on the sales tax side of the soft drink, so there's a mechanism in there to ensure that the state maintains ample funding for Medicaid and all of the important programs that we fund out of our general revenue,' Ray said.
Under the bill, the sales tax would go to general revenue funding, and Gess believes it's not clearly allocated to Medicaid.'When budgets are tight, when we face a lot of uncertainty with what's going to happen with the federal budget going forward, this idea of losing this 2% without a dedicated replacement is quite frankly scary,' Gess said.
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Ray said Arkansas is the only state with a soft drink tax, and 49 of the 50 states fund Medicaid without an excise tax on soft drinks.
'The Medicaid trust fund has a balance of over $500 million, there's over half a billion dollars in that fund, and there are five other revenue sources that go into it. This is just one revenue source, and so I think the Medicaid trust fund is going to be just fine without this tax,' Ray said.
The bill failed in the House on Monday.
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