Arkansas's Tax Cut: Could Be Worse, Could Be Better

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Arkansas Governor Mike Beebe and the state senate worked together this week to pass a series of measures aimed at helping low-income Arkansans.The keystone of the tax package was a cut in the state sales tax on groceries from six percent to three percent, one of Governor Beebe's leading campaign proposals.A study by the Arkansas Advocates for Children and Families (AACF) projected annual savings for a family of four ranging from $98 to $298, depending on income level.The Governor's Office estimated that the sales tax change would cut state revenues by $252 million this year.Everyone involved in the effort to pass this bill deserves high praise for bringing attention to this important issue.However, research by the AACF using ITEP data indicates that a refundable Earned Income Tax Credit might be an even more effective way to help low-income Arkansans.According to the data, a 24% refundable EITC would cost almost exactly the same as the grocery sales tax exemption, but would provide more assistance to families in need.Arkansas lawmakers should consider a refundable EITC to get the most bang for their tax bucks.

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