Arkansas voters set to decide on continuation of sales tax for roads
June 26, 2020
Voters in Arkansas this fall will decide whether to continue collection of a sales tax to pay for transportation work throughout the state.
In 2012, Issue 1 on the statewide ballot was approved with 58% of voters agreeing to a one-half percent sales tax increase to cover a $1.3 billion bond issue for roads and bridges. In place since 2013, the tax collection has a sunset date of July 1, 2023.
General obligation bonds were used to help address repairs and construction of a statewide four-lane highway system
Sales tax details
The 10-year tax raises about $300 million annually. Continuation of the sales tax collection is estimated to result in about the same amount of yearly revenue.
Two-thirds of the revenue is directed to the Arkansas Department of Transportation. Cities and counties split the rest.
Tax money would continue to be used to help address repairs and construction of state highways and bridges, county roads, and city streets and bridges.
Approval of the tax extension would be permanent. Voters in the state will decide the issue on Nov. 3.
The sales tax would not be applied to food purchases.
Legislature acted a year ago
Pursuit of the sales tax extension comes one year after the Legislature began collections of a new tax rate to benefit transportation.
Since 1999, the state collected a 21.5-cent excise tax on gas purchases. A 22-cent rate was collected on diesel purchases.
Last fall, the state implemented a wholesale tax to be collected on fuel purchases. The additional tax amounted to a 3-cent-per-gallon gas tax increase to 24.5 cents. The diesel tax went up 6 cents to 28.5 cents.
The new tax also is indexed to increase by up to one-tenth cent per year over the next decade.
The additional tax rate collections are estimated to raise $95 million annually for the Arkansas Department of Transportation. Another $13 million will be raised for cities and counties to do road work.
About one-third of the revenue will come from the new wholesale tax.
Also included in the one-year-old law is increased license fees on hybrid and electric vehicles. Increasing registration fees for hybrid and electric vehicles is estimated to raise $1.9 million per year.
Additionally, the state DOT can claim a portion of casino tax revenue. Any tax revenue beyond $31.2 million annually will be diverted to roads. ArDOT is guaranteed a minimum of $35 million each year.