By Caleb Taylor

Arkansas’s annual sales tax holiday allows shoppers in Arkansas the opportunity to purchase certain school supplies, school art supplies, school instructional materials, and clothing free of state and local sales or use tax one weekend per year. The holiday occurred on August 1-2 this year. Sixteen other states have similar back-to-school holidays.

Although the holiday is well-intentioned, ACRE-Affiliated Researcher Aaron Newell says in “,” published in Arkansas Business on September 21 that the policy fails to meet its stated goal of providing real sales tax relief to Arkansans.

Newell writes:

Policymakers distorting the market by favoring certain products can be harmful. Administrative costs for small businesses to administer sales tax differently and only on certain products can be high. The ‘holiday’ costs nearly $2 million annually in lost revenue. This lost revenue can harm schools, as local sales taxes partially fund education. It can also be a flashy distraction from pursuing real tax reform.”

Newell notes that Arkansas has the second-highest average state-and-local sales tax rate behind only Tennessee. However, Tennessee’s sales tax burden is offset by having no state income tax.

Newell writes:

A sales tax holiday ignores the real problem: the year-round sales tax rate in Arkansas. We can pursue real tax reform that spurs economic growth. Expanding the sales tax base and lowering sales tax or other rates is an economically sound plan that would better help those in poverty, make us more competitive with neighboring states and help small businesses — every weekend of the year.”

You can read Newell’s entire op-ed .

You can find more of our research on taxes and spending here.

By Caleb Taylor

Arkansas is tied with Tennessee for having the highest average state and local sales tax rate at 9.47 percent, according to a .

ACRE Scholar and Assistant Professor of Economics Dr. Jeremy Horpedahl discussed the relationship between Arkansas’s high sales tax rate and special elections in an interview with Paul Harrell on Conduit News on Thursday, July 18. 

Special elections are elections held for a specific purpose that occur on dates other than primary or general election dates.

Horpedahl attributes Arkansas’s high sales tax burden partly to local governments having “a lot of discretion” to hold elections on sales tax increases throughout the year. While most states allow some kinds of local-option sales taxes, Arkansas is .

Horpedahl said:

Most of these sales tax special elections…almost all of them, 83 percent, take place during some time other than the general or primary election. What we also found is that voter turnout is much, much lower during these special elections. We found that on average voter turnout is only 19 percent for these special elections while it’s over 40 percent for general elections. Finally, these sales tax increases are much more likely to pass during a special election. Three-fourths of them pass if they’re during a special election and fewer than half of them pass if it’s in a general election.”

For more, check out our one page summary of our research on this topic.

Former ACRE Program and Research Assistant Aaron Newell’s op-ed, “,” published by Arkansas Business on March 11th, discusses our research and legislation that would’ve limited special elections to primary and general election dates with certain exceptions. 

You can also watch Horpedahl’s testimony regarding his research on special elections and sales taxes at a House State Agencies and Governmental Affairs committee meeting on February 13 .

Arkansas has in the nation. How did this happen? Research we are conducting at the Arkansas Center for Research in Economics suggests that part of the reason is that many counties and cities have elected to increase their own sales tax rates. Since 1981, local governments in Arkansas have the right to hold local option sales tax elections. But our research also reveals that 82% of local option sales tax elections are held outside of general or primary elections. Sales tax increases in special elections have a much higher chance of passing, and voter turnout is very low in these elections.

The Arkansas legislature is currently considering a bill that would move most special elections to either general or primary elections. is designed to increase voter turnout by requiring special elections, such as sales tax elections, to be held at the same time as a primary or general election if there is one occurring in that year. For years that have no primary or general election, the bill also proscribes two specific dates on which these elections may be held. Under current law, cities and counties have a great deal of discretion as to when the election can be held.

Starting last summer, I began collecting data on sales tax elections in Arkansas along with one of my students at UCA, Alex Tatem. She and I have been able to locate data on over 900 sales tax elections in Arkansas going back to 1981, the first year local governments could hold these elections. We believe this is very close to the complete set of data.

Of the over 900 elections, we found that 82% were held outside general or primary elections, and that these special elections had very low turnout, only about 19%. But the number of sales tax increases approved in special elections was extremely high, at about 77%. This contrasts with sales tax elections held during a general election, which were about 15% of the total. Only a small number of sales tax elections, 3%, were held during primaries.

During general elections, voter turnout was much higher, at about 44%. That is more than double the 19% turnout in special elections. And the number of tax increases that passed was much lower in general elections, with a pass rate of about 45%. Please download our one-page summary of data related to this issue, available in PDF format.

We also tried to provide some estimates of the cost of holding special elections, specifically for sales tax increases. This data was harder to find, but using data we found from a few large and small counties and cities, we estimate that all special sales tax elections since 1981 have cost a cumulative $7.4 million (in inflation-adjusted dollars). That is an average of over $200,000 per year. Keep in mind, though, that this is not simply the price of democracy. That is money that could be completely saved if sales tax elections were held to coincide with other elections, such as general or primary elections.

In summary, based on our research we predict that this bill would increase voter turnout, decrease sales taxes over the long run, and save local governments much needed revenue by having fewer elections. If the bill does not become law, local governments will continue to have the discretion to set election dates as they have since they were given the right to hold sales tax elections in 1981.