LITTLE ROCK, Ark. — Little Rock Mayor Frank Scott Jr. proposed a one-cent sales tax increase in his State of the City address Thursday night.
This would take sales tax from 9% to 10%, which the mayor said would help improve the quality of life in our city.
When Mayor Frank Scott Jr. proposed this increase, he compared Little Rock to some of its neighboring Arkansas cities to demonstrate how the city trails behind them.
For example, he said Lonoke County has a sales tax rate of 10.5%, while Searcy and Fayetteville are both at 9.75%.
We compared other central Arkansas cities, finding he’s right.
Little Rock collects less sales tax than Hot Springs, which is at 9.5%, Conway at 9.13%, and Pine Bluff at 10%.
Michael Pakko, Chief Economist and State Economic Forecaster for the Arkansas Economic Development Institute, said right now Little Rock has the lowest city sales tax in the county.
“Little Rock is on the low end of local sales tax rate,” he said.
Mayor Frank Scott Jr. asked voters for their help to “lift Little Rock” by approving a one-cent sales tax increase on Thursday night.
Pakko said it’s a complicated issue to calculate.
“From a tax payer’s perspective, that’s not a good thing. From a city revenue perspective, it’s a different matter,” he said.
This one penny would take the sales tax from 9% to 10%, which in return would bring about 50 million more dollars into the city.
It’s money Mayor Scott said he would use to improve Little Rock’s quality of life by reinvesting in parks, public safety, infrastructure, and more.
Pakko said that’s a significant increase from what our sales tax brings the city now, which is $75 million annually.
“That would go up to about $125 million, so we are looking at about a 67% increase in that source of the city’s revenue base, so that would make a considerable difference, I would think, in the city’s overall budget,” he said.
Pakko said this small difference can matter when it comes to patterns of retail sales, but in the end, consumers and business owners probably won’t even notice.
“It’s not even the kind of thing you would see as a business owner or a consumer,” he said.
Business owners like Kendall Sandifer, who owns Fringe Clothing in Little Rock, said this increase is a little scary.
“People already bark at sales tax and then we’re going to add a whole other percent,” she said.
Sandifer said it also depends on the consumer though, because some people are going to buy what they want, no matter what.
She said she believes that if this one penny improves the quality of life in Little Rock, then as a native here, she is on board.
“As a person of Little Rock, let’s make it better,” Sandifer said.
Mayor Scott was not available for an interview, but his communications director did confirm that there would have to be a special election called for this proposal.