Charlie Collins' plan to make the rich much richer | Arkansas Blog

Friday, March 1, 2013

Charlie Collins' plan to make the rich much richer

Posted By on Fri, Mar 1, 2013 at 10:35 PM

Sorry. Some idle time for me this afternoon after touring Napier, New Zealand, an Art Deco treasure because the entire town was rebuilt in that style after a devastating earthquake and fire in 1931. Thought of you, Barry.

I want to add a bit to Lindsey's post on Charlie Collins' bill to cut the state income tax. The rates, though modestly indexed in recent years are badly out of whack and need a higher point at which the 7 percent top rate kicks in. But a windfall for the wealthy on the top end? Can't wait to see what the cost will be for knocking the top rate down to 6 percent from 7 in two or three years, as Collins proposes. As it happens, I got some numbers months ago from the Department of Finance and Administration in anticipation.

Here's the table. It shows you tax information on Arkansas income tax filers in 2010.

Here's the simple bottom line.

Charlie Collins wants to give taxpayers a 14 percent income tax cut on all income over about $34,000.

What does that mean?

Check the table

* 3,077 taxpayers made more than $500,000 in taxable income (after deductions). Some earned way more. They paid $263 million in taxes on $3.8 BILLION in income Republican Rep. Collins would reduce their taxes by approximately $37 million, or an average of $12,000 for each filer.

* Another 6,900 taxpayers made from $250,000 to $500,000 in taxable income. They paid $163 million in taxes on $2.3 billion in income. Dropping the top tax rate from 7 to 6 percent for them would cut their taxes by roughly $21 million, or almost $3,000 each.

Then let's look at the single biggest taxpaying group in the table. This would be the 39,181 taxpayers who reported taxable income between $50,000 and $55,000. Collins' tax cut wouldn't help them quite so much, because a smaller portion of their income falls into the top marginal rate. But let's just generously assume they'd get a 14 percent tax cut, too. They paid $128 million in taxes on $2 billion in taxable income in 2010. The $16 million tax cut for that group would be worth, on average, what, less than $400?

Even if the rates need adjusting to be more progressive, you don't achieve progressivity by giving the average millionaire a tax cut 30 times that what you're giving somebody making $50,000 a year. Why not at least keep the top tax rate for those with taxable income in excess of $250,000? Together, these roughly 10,000 taxpayers (out of 1.2 million, or less than 1 percent of all Arkansas taxpayers) reported $6 billion in income. They don't seem to have been held back too much by the Arkansas tax rate.

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