Words of wisdom | Arkansas Blog

Saturday, August 19, 2006

Words of wisdom

Posted By on Sat, Aug 19, 2006 at 10:23 AM

We've been remiss of late in not guiding you to the supplemental dose of Ernie Dumas you can get by reading his twice-weekly editorials, generally on Arkansas topics, in the Leader, Garrick Feldman's newsy paper in North Pulaski County.

Good examples:

College bonds: Dumas says colleges have more needs, but wonders what's the need of spending big dollars on interest payments, lawyers and underwriters when the legislature could do the same projects much cheaper with the existing surplus.

Pandering: He found not much to like from either Mike! or A$a! in their remarks on tax policy to Arkansas bankers, particularly A$a's desire to cut the capital gains tax yet again.

Tax cuts always sound good and sometimes inject a small stimulus into the business cycle. But government needs revenue to run the schools, colleges and its many other functions, and it needs to collect it as fairly as possible. It is simply not fair to tax working people on every dime of their wages but give a free ride to the investment class, which now includes to some small extent a good 40 percent of us. If we are to have an income tax, it should be on income, not merely the earned income of workers.

Cutting or eliminating taxes on capital gains may indeed spur more investment, but so would cutting or eliminating income and payroll taxes on wages. Already, the effective Arkansas income tax rate on capital gains and on other high incomes is less than 5 percent. That is because of the 30 percent exclusion of capital gains and the deductibility of state income taxes from the federal tax payments of taxpayers who itemize.

If taxes are to be cut, they are not for those who need it.

Estate tax: There's praise for Mark Pryor's compromise on raising the estate tax exemption to a hefty $5 million ($10 million for a married couple). But Pryor knows as most in Congress do that only total repeal is acceptable to the truly wealthy who are driving this effort and for whom Blanche Lincoln is working so assiduously. Dumas explains the simple arithmetic once more (and suggests that it is the D-G, not Pryor, that has been dishonest about the senator's position on the issue).

Here is all that anyone needs to know to understand Pryor’s predicament. In 2004, only 168 estates in Arkansas were paying federal estate tax of any kind. Most of those involved nominal amounts. In 2009, the last year that the tax is to apply before its one-year elimination, every estate smaller than $3.5 million ($7 million for couples) will be exempt. The tax will apply to roughly 3 of every 1,000 estates.

But those three involve some very powerful people. They are big spenders politically. The 113,000 minimum-wage workers? They will likely not give a dollar to a political campaign.


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