Columns » Ernest Dumas

Dumas: GOP now aids the rich



For nine weeks, the legislature has been finding ways to increase the government's dominion over people's lives: limiting the number of days after a woman gets pregnant before her body becomes government property; requiring the poor, elderly and disabled to get a photo ID from the government before exercising their right to vote; putting more government doings and data out of the reach of the citizenry; prescribing the tattoos the government will permit people to sketch onto their skin, lifting people's protections from gun marauders and vigilantes — make your own list.

This week the Republican legislature will turn its attention in the opposite direction: staying the government's heavy hand against the citizenry. Actually, only a few of the citizenry — rich white men and manufacturers mainly — but they count, too, don't they?

The Republican majority thinks the government has its hand too deeply in the pocketbooks of the richest Arkansans and industries, and it's going to give them relief.

Rep. Warwick Sabin has a competing bill. It would give a tax break to low- and middle-income families, but a Democrat is the sponsor and it is aimed at helping the wrong people, so it has no chance. Sabin's bill helps most of the 1.2 million tax filers in Arkansas and ends the regressive nature of the tax brackets, but it also would collect some money from people with fairly high incomes. You know how Republicans feel about that.

The big Republican bill, HB 1585 by Rep. Charlie Collins, would adjust the top income bracket and lower the top marginal rate from 7 to 6.875 percent. The House speaker, Davy Carter, says we must cut taxes on investment income, so another bill, now only a shell, will cut taxes on capital gains. Details will be filled in when they decide how much of a tax break for wealthy people the state can stand without hurting schools, health and public safety too much.

The GOP income tax bill would take $28 million out of the treasury at first and $57 million when its full impact is felt. Here is how it will affect you. If you're in the bottom 40 percent of taxpayers, earning up to $29,000, you will get no cut. If you're in the middle fifth, earning between $29,000 and $49,000, your taxes will be shaved about $7 a year. Spend it wisely.

But if you're in the top 1 percent of taxpayers, making $346,000 or more, your tax cut will average $1,275, although you will have to turn around and give 35 percent of it to the IRS because you will lose the federal deduction for those taxes. Republicans are just taking that money out of Arkansas to pay for Obamacare.

Half of the $57 million savings would go to people reporting above $155,000 a year. The richest will fare far better than that, presuming a capital gains tax cut of some size passes. The state already exempts 30 percent of a person's long-term capital gains, and the Republican bill will exempt even more or provide a lower tax rate than the state collects from people who work for wages.

Let's talk about those capital gains, which are profits on the sale of property, including stocks and other securities.

In 2011, Arkansans reported about $1.4 billion in net profits from investment transactions. After excluding 30 percent of the long-term capital gains from taxation, the state levied income taxes on less than $1.1 billion. About half of that, $513.3million, was income reported by 1,304 people (mostly husbands and wives) whose gains totaled more than $500,000. They're the people Carter and his party intend to help.

Obviously, they are not the neediest. Even Republicans won't make that argument. Rather, they are the "job creators." See, if one of the billionaire Walton heirs can keep a few million dollars more of his profits he will tell Wal-Mart to open more stores and hire more greeters and clerks.

Of course, history shows no such trend. When Arkansas exempted 30 percent of long-term capital gains from taxation in 1999, effective the next year, and Congress slashed capital gains tax rates in 2001, they were followed by some of the worst job records in modern history, for the state and the nation. On the other hand, when Congress in 1986 required the taxation of capital gains the same as wages and salaries it fueled the big job gains in 1987-89 that became the Reagan economic miracle.

The big Republican justification for tax cuts is that Arkansas is a high-tax state, which keeps business from investing in the state. That is pure baloney. If low taxes stimulated growth and jobs, Arkansas long ago would have been the industrial center of America. For much of its history it had by far the lowest state and local taxes in the country.

As of 2010, we were 47th. That is based on the taxes actually collected per capita by the state and local governments and spent here on services like schools, roads and law enforcement.

But Republicans rely on the helpful Tax Foundation, which shows Arkansas as a high-tax state by using a formula that assigns to Arkansas some of the high taxes collected and spent in Texas, Wyoming, Florida, Tennessee and other states. It says high taxes on minerals, tourism and many businesses in those states actually are passed on to consumer states like Arkansas, which then becomes a high-tax state. I'm not kidding. That's why the Republicans say we have to cut taxes for our well to do and reduce the government's support of education.

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