The Arkansas Project

More on the Milk Tax

By David Kinkade - August 25, 2008 7:19 am

I’ve harped on the Arkansas Milk Stabilization Board a couple of times in the last week (here and here). The board is considering a “fee” to be imposed on milk wholesalers to help bail out the state’s struggling dairy farmers, which, any way you slice it, has to be seen as a stealth grocery tax that will be passed on to consumers.

Rob Moritz of the Arkansas News Bureau reported on the matter yesterday, and digs up a compelling statistic:

In the past 15 years, the number of family-owned dairy farms in the state has dropped more than 80 percent from more than 800 to less than 160. (emphasis added)

Arkansas’ dairy farmers, who once produced all of the milk processed in the state, now produce just 25 percent, with the rest shipped into the state.

Consider that for a moment: The number of dairy farms in Arkansas has dropped by 80 percent….yet we’ve seen no disruption in supply or significant price increases. Why, I was just at the store last week, and sure enough, those coolers were full of milk, butter, cheese—every dairy product you could want.

So when advocates of this fee try to tell us that it’s needed to ensure a supply of milk for Arkansas, they can be safely ignored, right? Supply concerns are simply not relevant to the debate, given the innovations in transportation and refrigeration that have allowed Arkansas to enjoy a reliable and safe supply of milk from other states.

And a “to his credit” moment: Democratic legislator Johnny Hoyt of Morrilton, who sponsored the legislation to create the milk board in 2007, is dubious of the fee proposal in the Moritz story:

I do have concerns that (a fee) would be passed on to consumers. I think this would be a hard sell to the Legislature,” he said. “I wanted (the board) to find a way to help dairy farmers … I’m hoping they’ll continue to look at other options.

The board meets again Sept. 18, Moritz reports, to consider the milk tax. The Arkansas Grocers and Retail Merchants Association is also on record opposing the proposal.

Update: In the comments section, readers debate my “no significant price increases” statement about the price of milk. To clarify: Obviously, milk is more expensive today than it was in 1993, and it’s gone up quite a bit even in the last year (as have pretty much all food prices).

But that seems to be more a function of higher prices generally and a function of multiple factors aside from the number of dairy farms in Arkansas, of which there are significantly fewer. And the milk tax proponents aren’t making the argument that their scheme will make milk less expensive—they want to boost the cost further by imposing a fee to benefit dairy farmers.

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