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Sunday, July 29, 2012

Talk is cheap at Republican convention

Posted By on Sun, Jul 29, 2012 at 7:40 AM

SUCH A DEAL: Republicans say theyll end the income tax. Missing is the fine print on what theyd replace it with.
  • SUCH A DEAL: Republicans say they'll end the income tax. Missing is the fine print on what they'd replace it with.

You just can't beat the Republican Party of Arkansas when it comes to issuing poll-tested talking points. Consequences? Let's not talk about that.

The Republican Party adopted a sure-to-please party platform yesterday — anti-immigrant, anti-gay, anti-abortion, anti-Obama, anti-universal health care, anti-making-gas-industry-pay-for-road-damage and, most of all, anti-tax.

The platform, according to news reports, pledges to end the state income tax and replace it with something more equitable.

The income tax, when originally conceived back in the 1970s, couldn't have been more equitable, with its graduated tax burden. It has, admittedly, gotten out of whack. The top rate of 7 percent kicks in at $32,600 for a single person, not exactly big money. An adjustment to a graduated scale more in step with the value of the dollar today — and that would not devastate the state budget (not that Republicans worry about that) — would require a higher rate on high income people.

That's not the kind of equitable solution Republicans are likely to favor.

So what, really, is the option for replacing the income tax? You know it. The sales tax, favored by Republicans from Mike Huckabee on. Or some variance of a value added nature. Here's what the platform says:

Replace the State Income Tax with a more equitable method such as increasing the State Sales Tax. Everyone would pay the same percentage and would know they are paying their fair share for the government services available to all citizens. The maximum increase in State Sales tax would be limited to no more than 2 percent.

So let's look at the numbers in a simplistic way. In the budget year that ended June 30, the individual income tax produced $2.9 billion for Arkansas and the corporate income tax produced $435 million. (Yes, that's right. The corporate income tax, thanks to all kinds of tax avoidance schemes built into state law, produces a relative pittance. Another part of the Republican platform is some form of constitutional amendment to make the state more business friendly. As if ...)

So, your task is to find another source — more equitable, remember — to produce $3.3 billion dollars.

The state sales tax, at a 6 percent rate (with a lower rate for groceries, 1.5 percent, and manufacturers — not individuals' — utility rates of 2.75 percent) produced $2.1 billion last year. So, to produce $3.3 billion to replace the lost income taxes, you'd have to jack the existing sales tax rates by 150 percent. That would mean a 15 percent tax on your new car purchase, back to almost 4 percent on groceries and back up to the rate everybody else already pays of about 6 percent on manufacturers' utilities. Sound equitable? This is the very roughest of calculations, but it gives you some idea of how easy it is to talk, how hard it is to replace lost revenue.

The 2 percent limit imposed by the Republican platform would fall, oh, $2.5 billion short.

Alternatives?

We could try to exact a meaningful severance tax on gas, oil and timber. But, the Republican platform says quite clearly that's a non-starter.

We could end the unconscionably low property tax rates on agricultural land, including timber. The 'baggers would riot in the streets.

Corporate franchise taxes, such as Texas charges in place of an income tax? Sorry. That wouldn't be business friendly, and the Republican platform requires that.

Come on, tall talkers in the Republican Party. Let's get specific on that so-called equitable replacement for the income tax.

I'll bet you the solution is the same as the national solution — cut taxes on the rich, raise them on the poor and slash government spending that benefits the working class.

DONT FORGET: Switching the tax burden from income to sales taxes would be a monumental tax cut for the rich and a regressive, punishing tax increase for the poor. This has already been empirically proved in Kansas, which didn't stop the Republicans from adopting it.

Then the ideas for cutting spending: End health care for children and the working poor. Amend the Constitution to end the requirement for state provided sufficient and equitable education. (But who would pay for the Waltons' charter schools then?) State employee health care and pensions clearly can be eliminated. Highways? Toll roads worked for the wealthy in medieval times. Mercenary police forces could protect those with money to afford them. It's not equitable to provide services to people who don't pay for them, is it? I haven't worked out a plan on prisons just yet. Higher education can be fixed by enormous tuition increases. OK, only the well-to-do will be able to afford college. But that will be an incentive for parents to work harder and smarter.

Here's the full platform. Read it and weep. Injured people would find it very difficult to sue. Corporate welfare will flow in a mighty river to businesses (though the source, after all the tax cutting, is a little unclear). Free trade is exalted (the definition including taxpayer subsidies of farmers). Private school vouchers. No sex education worthy of the name.

This one is funny: There is no estate tax in Arkansas, but the platform, for good measure, calls for repeal of "death taxes" on the state level.

CORRECTION AND UPDATE: I learned several days after this post that, though it was not reflected on the GOP website until later, the party did amend the tax platform plank to only call for end of income tax, but to omit any reference to a sales tax increase. An aversion to tax increases of any sort and the realization of the arithmetic I cited played a role. But, if anything, this makes the platform worse. They'd cut taxes by $3 billion dollars with no way to make it up except cutting services.

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