Arkansas Blog

Doesn't it makes sense that the ones who hate taxes the most are the ones who would cheat?

When you find people who scream, scream, scream about taxes (as you do on this blog) odds are you've found someone who'll cut a corner or two if they think no one is noticing.

A terrible idea by Brummett. Remember that we had a national "tarriff" and the progressive wing of the Democratic Party fought to amend the constitution to allow for a progressive income tax. The income tax is the fairest of all taxes and the voters should elect politicians who are smart enough to conduct oversight over the IRS. The Administration has shifted billions out of corporate and high-income returns and shifted those resources into the enforcement of EITC returns. It is shameful.

We don't need a new tax structure, we need Wilbur Mills.

We also need reporters who will actually dig into the issues rather than take the testimony of IRS officials and politicians as fact.

We need to get to reality instead of platitudes and we can only do that with an informed third party reporting without passion. I applaud Brummett for writing, but can he discuss the implications of eliminating the corporate income tax and replacing it with a tax (rather than a deduction) on the cost of goods and cost of inventories.

A lot of liberals are in love with the European model VAT, but there are quite a few overlapping taxes that aren't discussed (such as the "wealth tax" in France and the tax free zones of Ireland).

Replacing the income tax with a consumption tax would be far different in America (the world's largest consumer) than it would impact the Japanese (the worl'd greatest savers) or the developing world (whose goods would be increased in cost in the US market if a Brummett-style tarrif was imposed on them).

Some Little Rock law firms were central to one particularly bad abuse in overseas shelters. Some US Senate lawyers even showed up in Little Rock a few years ago (one we know well now) to spread the warning and stop the abuse.

The problem is law firms who are selling shelter ideas. The IRS knows about it but doesn't have the resources to fight their publlic sector legal competitors. Upright lawyers can't even compete for the business of the clients because they aren't willing to twist the law - we deserve real law enforcement.

What we need is a crack IRS team to be assembled to break the bad firms of their practices.

Go to fairtax.org ..it will explain it all. This country must go to this tax structure. The Liberals are running off the wealthy overacheivers with the income tax. axing the Income tax is the way to go...Don't believe me? Arkansas has a 7% income tax. Tenn & Texas has no income tax. Who has the car plants? Not us !!!!!1

Roland, if you worked and paid taxes then you can make those statements. Until then, shut your socialist mouth and get a job lazy boy. NW Ark Guy

I'll have fries with that, little guy.

A Sales tax that all must pay regardless of income/class/demographics.

This idea is fair, democratic makes economic sense and Morally just.

Therefore the democrats will oppose it.

It is not morally just to make someone who barely gets by paycheck to paycheck to pay the same percent of taxes as Paris Hilton.

The poor person ends up paying sales tax on 100% of their income because they have none left to save. Paris Hilton pays sales tax on 5% of her income.

But now that I think about it, I see how this would be absolutely morally just in the Republican world. God ordained that the rich pay less taxes because they won the lucky sperm club lottery.

This sounds as unworkable as the old "blue Laws".

Remember the Reagan years debate over if a tomatoe was a vegtable or a fruit?

To get around the tariff on lumber Canada drilled holes in 2x4's because lumber had a high tariff but predrilled studs did not. So drilling a hole in the 2x4 made it into a value added stud with no tariff.

This "SIMPLE" tax structure would span a whole industry of tax lawyers working loop-holes.

On the example of the BMW and the pickup.

Define luxury. If you decide power windows and heated seats means luxury, then BMW's would come without power windows and heated seats. Then you could get a kit to plug in the "luxury"

We can't say all pickups are not "luxury" because those Cadillac Escalades are certainly "luxury" and worth more than a stripped down BMW.

It is preposterous to think that the rich would not hide their income from federal taxation if they can. Who wouldn't? It is the same reason industry as well as residents decide to cross over state borders and live in Memphis or Texarkana, Texas instead of the Great State of Arkansas. There is greater incentive to hold residence in those states since they can keep more of their income. If they move from Arkansas to either of these states they are essentially receiving a 7% raise. This is why Arkanas and the Federal government are losing part of their tax base. The idea of a national sales tax, or fair tax as it is sometimes referred to, is the best solution to the unfair bewilderment that is the current tax code. The fair tax would tax consumption at a rate somewhere between 17 and 26%. The wealthy will pay strikingly more than the poor because they will obvioiusly consume more. Mr. Brummett's idea of a progressive sales tax is bogus in that it gives people too many chances to hide behind loopholes. Currently, the top 50% of income earners pay 96.54% of taxes, meaning the other half pay basically nothing. The top 50% earn $30,000 and higher a year. These are everyday people, who are squarely lower and middle class, not high earners. How is this fair? A sales tax would equalize the tax burden over all income classes. There of course could still be credits and refunds for extremely low earners. This policy would also promote entrepreneurial activity and economic growth as the marginal tax rates would be lower across the board. Over a not-so-long period of time, the fair tax would pay for itself (the Laffer Curve effect), as more domestic businesses started and more foreign investment came pouring in to enjoy our favorable tax rates. This would in effect disincentify teh using of these loopholes and tax shelter's that has Mr. Brummett in such a fluster.

The problem with the sales tax idea is that inevitably large-cost items (such as a house, car, industrial equipment) wll be exempted. The rich will end up paying very little - they will also be able to live off their investments (idle wealth) while the rest of us have to work.

"the top 50% of income earners pay 96.54% of taxes"

This number is very illusory. The fact is that 52% of Americans earn less than 20,000 a year which means they are EITC and not "taxpayers." I would bet good taxable money that they would all LOVE to be earning enough money to have the distinction of being income tax payers.

To Anonymous,

I feel so sorry that you will "have to work" while the rich "live off their investments." What else is capitalism about? If you are upset because others have taken entreprenuerial risk or through hard work have become wealthy, then I suggest you up and move to France where you can enjoy 4 hour work days 4 days a week and have the government tax you to the tune of 50%. That is if you are lucky enough to get a job in a country with an unemployment rate of 12%. While houses may very well receive an exemption from the sales tax, you are wrong to think other big ticket items will be. Companies and individuals pay taxes on these right now, so why do you think that will change? The top 1% of tax payers pay 34.27% of total taxes presently! How is that fair? People should not be punished because they create large amounts of wealth for themselves. That is what we are all after.

"The fair tax would tax consumption at a rate somewhere between 17 and 26%."

I think most Arkansans (and the consumer economy) would fare far better with a 7% income tax on the incomes they have over $15,000 ($350 on a $20,000 salary for example) than a 26% tax on their consumption (which would be $5,200 on a $20,000 salary since they can't afford not to spend their salary on basic living).

I can't believe Brummett has opened up this can of worms - . . . .well I guess it IS a half-cocked opinion-over-thought article from one of Arkansas's journalists-of-surmise . . . .I am not really surprised at all.

The credits for the bottom would not be as handsome for the credits on the top (business expenses). If you end up carving it up it will be as confusing as the income tax.

"I feel so sorry that you will "have to work" while the rich "live off their investments." What else is capitalism about? If you are upset because others have taken entreprenuerial risk or through hard work have become wealthy... "

There are a couple of key points here:
1) People who get rich in the US could get rich anywhere, including communist Russia or China. Taxes won't stop a will to power. It is an illusion to believe that we'll stop having rich people if we increase taxes.

2) You leave out inherited wealth. I will not apologize for having a problem with Paris Hilton living off her investments while people both you and I know struggle to make ends meet. It's hard for me to believe that you think Paris Hilton is a poster child for capitalism, when in fact she is nothing of the sort.

The imbedded income tax cost in what we buy is from 22% to 26%. When the fair tax is levied, the imbedded taxes will disappear reducing the price of everything from 22% to 26%. Additionally, the cost of compliance would be minimal. This system makes way to much sense to ever be implemented.

If you think producers will reduce costs just because "imbedded costs" are reduced you are crazy. Did you know that the airlines have staff dedicated to hedging the fuel markets - you wouldn't know that by the way they charge surcharges when oil prices go up. Only a fool thinks that reduced costs get passed on like increased costs.

Another example of a person who doesn't understand how markets work. Competition in the marketplace reduces prices. Just ask those companies that compete with Southwest Airlines, one of the only airlines that has hedged its fuel costs successfully. If SW Airlines has its imbedded tax cost reduced by 22% to 26%, I would bet it cuts prices of its tickets by a like amount.

Thanks for making my point - in markets where SW isn't in service the big arilines get away with spiking prices. also, because ALL the airlines (including SW) are playing the fuel game none of them are reducing their costs based on that fact. SW is cheaper for other reasons and chooses to maintain its margins on fuel as long as the people are sucker enough to fall for it.

I only chose the airline industry because of your example. Minimization of costs and the competitve advantage that companies (and countries) have because of it, is perhaps the most well documented micro (macro) economic subject out there. It is inherent in all free market and free trade arguments. Does anyone seriously dispute these arguments today except the protectionists and socialists on the far left and far right fringe?

Don't believe me? Arkansas has a 7% income tax. Tenn & Texas has no income tax. Who has the car plants? Not us !!!!!1

Texas has a "Corporation tax" which they enforce rather vigorously on all businesses based upon their income.
They also have a very high state sales tax.

Bleed ""I feel so sorry that you will "have to work" while the rich "live off their investments." What else is capitalism about? If you are upset because others have taken entreprenuerial risk or through hard work have become wealthy...

Capitalism in USOFA is about feeding off government in some manner and deriving benefits- profits- because a government structure has made it possible so yes, if you earned much more than others who actually helped you along? state funded colleges, med schools, transporation system, legal system? Let's face it. Without our system which costs money to uphold there would not be the climate to earn above average wealth. Think you could do it in the Congo?