Favorite

Tax cut madness 

To vote against a tax cut is supposed to be suicide for Republicans, and Democrats believe it too.

Tax cut madness

n The drive to slash the taxes of Arkansas's wealthiest people and biggest corporations rests on a single premise: People are too dumb or pay too little attention to know what is being done to them by their elected representatives.

That does not put too fine a point on the narrowly targeted tax cuts that the Senate and House of Representatives are whooping through this week. The tax cuts on capital gains and manufacturers' energy apply almost altogether to 1 percent or fewer of individual taxpayers and businesses — the most affluent 1 percent.

Any political manual would advise you that sponsoring or voting for such legislation would mark you for defeat in the next election. Corporate profits are hitting records and the very rich are soaking up a bigger and bigger share of the nation's wealth every year while everyone else is losing ground or hanging on, yet the tax relief goes to those who are most well off.

But the Republicans have a different theory. They believe that all you have to do is say "tax cuts" and most people will assume it's for them or that the benefits will reach them somehow. To vote against a tax cut is supposed to be suicide, and Democrats seem to believe it, too.

That political calculus has tended to be proven. The big Reagan tax cuts of 1981 and the George W. Bush tax cuts of 2001 and 2003 proved to be highly popular, although most of the benefits in all three rounds went to the top 4 percent of taxpayers and some low-income families actually had to pay higher taxes under the Reagan round. That the tax cuts produced gargantuan budget deficits never made it into the public consciousness.

It worked politically because they were general tax cuts, and Republicans could say truthfully that most Americans got something, even if it was too small to be felt.

The two big special-interest tax cuts this week do not do that. The elimination of income taxes on the capital gains from the sale of Arkansas property will benefit no more than 10,000 of the state's 2.9 million residents, and some 70 percent of the $64 million in tax savings will go to a handful of those taxpayers, those whose incomes are more than $250,000 a year. The $20 million reduction in sales taxes on electricity and gas will go only to manufacturers and the big electric utilities that burn gas to fire generating boilers. They are some of the nation's most profitable businesses: Tyson Foods, Pilgrim's Pride, ConAgra, Georgia Pacific, Cargill, Whirlpool, Entergy.

You can't sell people on the idea that they will benefit from these tax cuts when they know they will have no capital gains and do not own a manufacturing plant. But the ruse this time is that the tax cuts would create jobs. But neither tax cut would produce even one new job.

Arkansas is one of the few states that treats capital gains — profits from the sale of tangible property, stocks, etc. — differently from earned income from wages and salaries. The top income tax rate is 7 percent, but Arkansas taxes investment income on average at a little under 4.9 percent. That is because since 1999 it has excluded 30 percent of capital profit from taxes.

So the effective tax rate on capital gains in Arkansas is only about 3.3 percent.

Here is why the sponsors of the bill say it will create thousands of jobs in Arkansas: An investor has an idea that he can make $1 million by buying an Arkansas business or starting one and then selling in a few years. But if he looked at the Arkansas capital gains treatment and realized that he would be able to keep only $967,000 of the $1 million profit he would pass. He would rather have nothing than only $967,000. Is that how the business mind works?

The manufacturers' tax cut ought to make the average homeowner and businessman even madder. Under utility tariffs, industries pay much less for the electricity and gas they use than do homeowners or small businesses. The manufacturers' lobby, which includes the state and local chambers of commerce, got the legislature and Governor Beebe to slash the sales tax on their energy two years ago. Now they are back for a bigger bite.

If their sales taxes, which are a minuscule part of their energy bills, are sliced to a little more than 2 percent (yours are 6 percent plus a city or county levy) they say they might put someone else on the payroll.

Is ConAgra or Tyson going to hire someone because its profits are a trifle higher owing to their energy sales tax savings? They will hire another worker if demand for their products increases and they need another worker to meet it.

Altogether, all the tax cuts making their way through the legislature will reduce revenues by some $120 million a year by 2014. That's how the fiscal crisis in Washington and at the state capitals of Wisconsin, Texas, Oklahoma, Florida and other states began.

Favorite

From the ArkTimes store

Speaking of House Speaker Robert Moore

Comments

Subscribe to this thread:

Add a comment

More by Ernest Dumas

  • Coal is over

    The free market's natural search for cheaper and more efficient energy has taken over and even President Trump and a governing party heavily in denial about climate change cannot stop it.
    • Apr 13, 2017
  • Race to kill

    You wonder if Attorney General Leslie Rutledge would be so eager to execute if her grandpa, Leslie Rutledge, who was imprisoned for killing neighbor Joe Beel and mortally wounding his brother Frank, had been sentenced to death in 1952.
    • Apr 6, 2017
  • Repeal charade

    The debacle of the repeal-Obamacare movement left the president and the Republican Congress ruminating about the terrible lessons they had learned from the defeat — mainly that neither ever had a health plan or even a clue about how to frame one.
    • Mar 30, 2017
  • More »

Readers also liked…

  • Guns, God and gays

    Many more mass shootings like the one last week in Roseburg, Ore., will stain the future and no law will pass that might reduce the carnage. That is not a prediction but a fact of life that is immune even to Hillary Clinton.
    • Oct 8, 2015
  • AEC dumps ALEC

    No matter which side of the battle over global warming you're on, that was blockbuster news last week. No, not the signing of the climate-change treaty that commits all of Earth's 195 nations to lowering their greenhouse-gas emissions and slowing the heating of the planet, but American Electric Power's announcement that it would no longer underwrite efforts to block renewable energy or federal smokestack controls in the United States.
    • Dec 17, 2015
  • No tax help for Trump

    The big conundrum is supposed to be why Donald Trump does so well among white working-class people, particularly men, who do not have a college education.
    • Aug 11, 2016

Most Shared

  • Executionpalooza

    Appearances count. I was struck by a single sentence over the weekend in a full page of coverage in The New York Times devoted to the killing spree in Arkansas, beginning with a front-page account of the recent flurry of legal filings on pending executions and continuing inside with an interview with Damien Echols, the former death row inmate.
  • Art bull

    "God, I hate art," my late friend The Doctor used to say.
  • Not justice

    The strongest, most enduring calls for the death penalty come from those who feel deeply the moral righteousness of "eye-for-an-eye" justice, or retribution. From the depths of pain and the heights of moral offense comes the cry, "The suffering you cause is the suffering you shall receive!" From the true moral insight that punishment should fit the crime, cool logic concludes, "Killers should be killed." Yet I say: retribution yes; death penalty no.
  • Judge Griffen writes about morality, Christian values and executions

    Pulaski County Circuit Judge Wendell Griffen, who blogs at Justice is a verb!, sends along a new post this morning.
  • The Ledell Lee execution thread

    Arkansas Times contributor Jacob Rosenberg is at the Cummins Unit in Grady filing dispatches tonight in advance of the expected execution of Ledell Lee, who was sentenced to death for the Feb. 9, 1993, murder of Debra Reese, 26, who was beaten to death in the bedroom of her home in Jacksonville.

Latest in Ernest Dumas

  • Coal is over

    The free market's natural search for cheaper and more efficient energy has taken over and even President Trump and a governing party heavily in denial about climate change cannot stop it.
    • Apr 13, 2017
  • Race to kill

    You wonder if Attorney General Leslie Rutledge would be so eager to execute if her grandpa, Leslie Rutledge, who was imprisoned for killing neighbor Joe Beel and mortally wounding his brother Frank, had been sentenced to death in 1952.
    • Apr 6, 2017
  • Repeal charade

    The debacle of the repeal-Obamacare movement left the president and the Republican Congress ruminating about the terrible lessons they had learned from the defeat — mainly that neither ever had a health plan or even a clue about how to frame one.
    • Mar 30, 2017
  • More »

Visit Arkansas

Haralson, Smith named to Arkansas Tourism Hall of Fame

Haralson, Smith named to Arkansas Tourism Hall of Fame

Chuck Haralson and Ken Smith were inducted into the Arkansas Tourism Hall of Fame during the 43rd annual Governor’s Conference on Tourism

Event Calendar

« »

April

S M T W T F S
  1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30  

Most Viewed

  • Not justice

    The strongest, most enduring calls for the death penalty come from those who feel deeply the moral righteousness of "eye-for-an-eye" justice, or retribution. From the depths of pain and the heights of moral offense comes the cry, "The suffering you cause is the suffering you shall receive!" From the true moral insight that punishment should fit the crime, cool logic concludes, "Killers should be killed." Yet I say: retribution yes; death penalty no.
  • Art bull

    "God, I hate art," my late friend The Doctor used to say.

Most Recent Comments

  • Re: Art bull

    • the nice thing about art is that it is what it is, but what it…

    • on April 22, 2017
  • Re: Executionpalooza

    • Fantastic work-from-home opportunity for everyone... Work for three to five hrs a day and start…

    • on April 21, 2017
  • Re: Erasing humanity

    • Exactly how I feel only written much better than I could.

    • on April 21, 2017
 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation