Category Archives: Ernest Dumas

Charlie Collins and Milton Friedman versus John Brummett on taxes and job growth

June 7, 2012 – 10:11 am

http://www.freetochoosemedia.org/production/POC/presskit2/milton-president-reagan.jpg

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1

I know that Charlie Collins is a big Milton Friedman fan like I am. Therefore, I put this post together with both Collins and Friedman in mind.

John Brummett is one of the liberals in Arkansas that does write very interesting articles and  I make a point of reading them regularly. I don’t agree with many of them though. For instance, the other day Brummett made the statement that President Obama was not a big spender. That was not too difficult to debunk.

On June 3, 2012 in the Arkansas Democrat-Gazette Brummett asserted, “I’d like to rearrange these rates, exempting more of the lowest income from them altogether and hitting the rich folks a little more steeply than the 7 percent that kicks in way too early at $31,000 or so.”

I think this would drive away the job creators from Arkansas. I was thrilled that  Republican state Rep. Charlie Collins of Fayetteville was a given a chance to respond to Brummett in the June 7, 2012 edition of the Arkansas Democrat-Gazette. Here are some portions of his response:

Brummett said that, overall, taxes in Arkansas aren’t that high. Using federal numbers, total Arkansas state tax revenue on everything from income to fishing licenses in 2011 was $2,634 per person, which ranked us 35th of 50. However, as a percentage of personal income, Arkansas had the ninth-highest taxation rate in the country! States with higher percentages included special cases like Alaska (energy tax revenue included), North Dakota (energy taxes) and Hawaii (tropical island). Even California and New York took a lower share of personal income than Arkansas.

Our top income-tax rate is 7 percent on earned income above $33,200. My plan would give all workers tax relief and simplify the system. We eliminate two of the six tax brackets—the 2.5 percent and 7 percent rates—which drops the new top rate to 6 percent. We then phase in higher income levels (six-figure earners) for the 6 percent rate over time.

The result is a dramatic tax break for low-income workers (60 percent reduction from 2.5 percent to 1 percent), strong relief for middle-class working families (35 percent cut from 7 percent to 4.5 percent), and a modest drop for high-income workers and job creators (14 percent from 7 percent to 6 percent).

We can phase in tax relief at a pace that maintains state government spending, keeps the budget balanced, and includes other priorities such as eliminating the grocery sales tax and targeted spending increases. We do it by slowing the growth in state spending.

_______

Today President Obama is telling us that we must raise taxes in order for us to prosper and grow our economy and that sounds like the same think that Brummett and his liberal friend are saying. I have heard that before and it has never worked!!!!

Liberals like Ernie Dumas and Max Brantley who write for the Arkansas Times have always bragged on the 7% state income tax that Dale Bumpers raised in 1971 and how Arkansas has grown economically since then. However, the facts are quite different.

Ernie Dumas in his article “Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes effect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.

_____________

We can look at other states and see what their experience is too.

I’ve done a couple of posts comparing Reaganomics and Obamanomics, mostly based on data from the Minneapolis Federal Reserve on employment and economic output.

I even did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein upset.

Some of the best evidence about high tax rates vs. low tax rates comes from inside America. Art Laffer (yes, that Art Laffer) and Steve Moore have a great column in today’s Wall Street Journal. It’s sort of Reaganomics vs. Obamanomics, looking at evidence from the states.

Barack Obama is asking Americans to gamble that the U.S. economy can be taxed into prosperity. …Mr. Obama needs a refresher course on the 1920s, 1960s, 1980s and even the 1990s, when government spending and taxes fell and employment and incomes grew rapidly. But if the president wants to see fresher evidence of how taxes matter, he can look to what’s happening in the 50 states. In our new report “Rich States, Poor States,” prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece… Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

Tax rates also lead people to “vote with their feet.” Laffer and Moore look at migration patterns.

Over the past decade, states without an income tax have seen 58% higher population growth than the national average, and more than double the growth of states with the highest income tax rates. …Illinois, Oregon and California are state practitioners of Obamanomics. All have passed soak-the-rich laws like the Buffett Rule (plus economically harmful regulations, like California’s cap-and-trade scheme), and all face big deficits because their economies continue to sink. Illinois has lost one resident every 10 minutes since hiking tax rates in January. California has 10.9% unemployment, having lost 4.8% of its jobs over the past decade. …Every time California, Illinois or New York raises taxes on millionaires, Florida, Texas and Tennessee see an influx of rich people who buy homes, start businesses and shop in the local economy.

Competition among the states is leading some states to make further improvements. Some are even trying to get rid of their income taxes.

Republican governors in Florida, Georgia, Idaho, North Dakota, South Carolina, Ohio, Tennessee, Wisconsin and even Michigan and New Jersey are cutting taxes to lure new businesses and jobs. Asked why he wants to reduce the cost of doing business in Wisconsin, Gov. Scott Walker replies: “I’ve never seen a store get more customers by raising its prices, but I’ve seen customers knock down the doors when they cut prices.” Georgia, Kansas, Missouri and Oklahoma are now racing to become America’s 10th state without an income tax.

I like the quote from Governor Walker. He seems to know what he’s talking about, so it will be interesting to see whether he survives the upcoming recall election. I guess it depends whether voters understand that big government and high tax rates is a recipe for continued decline.

Some states, such as Illinois and California, are filled with voters who refuse to recognize reality. Think of them as the Greece and Spain of America, perhaps because the number of tax-consumers is greater than the number of tax-producers.

And even though parasites should understand it doesn’t make sense to kill their host animals, this cartoon illustrates how the welfare states lures a growing number of people to ride in the wagon. And this cartoon shows the consequences of too many moochers and not enough producers.

______________

Take a look at all the Milton Friedman clips that I have posted today. These liberals I mentioned above have truly forgotten how powerful the market is if not interferred with by the government.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 2

Related posts:

 

Why do people move to other states to avoid Arkansas’ high state income tax? (If you love Milton Friedman then you will love this post)

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office. Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1 Mike Huckabee recently moved to Florida? Why? The answer [...]

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 3

By Everette Hatcher III | Also posted in Arkansas Times, John Brummett, Max Brantley, Milton Friedman, President Obama, spending out of control | Comments (1)

Ernie Dumas:Tax cuts explode deficit

March 29, 2012 – 11:52 pm

Ernie Dumas in the Arkansas Times, Jan 18, 2012 argued:

A big majority of Americans are concerned about growing income inequality and government favor for the rich, and they understand that lower taxes do directly affect federal budget deficits, which Republican orthodoxy for 30 years has denied.

However, I like most Republicans would argue the problem is spending and not taxes. Take a look at this video and article from the Cato Institute concerning Illinios’ recent experience.

Illinois Downgrade: More Evidence that Higher Taxes Make Fiscal Problems Worse

Posted by Daniel J. Mitchell

I don’t blame Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that your opponent really wasn’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls for agreeing to the hikes, but they say it’s the right thing to do because of all the government red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying the higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

But we don’t need to look overseas for examples. Look at what’s happened in Illinois, where politicians recently imposed a giant tax hike.

The Wall Street Journal opined this morning on the results. Here are the key passages:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

…Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California.

…This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that.

…And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.

Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind:

1. Higher taxes encourage more government spending.

2. Higher taxes don’t raise as much money as politicians claim.

The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.

The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.

Uploaded by on May 3, 2011

This Economics 101 video from the Center for Freedom and Prosperity gives seven reasons why the political elite are wrong to push for more taxes. If allowed to succeed, the hopelessly misguided pushing to raise taxes would only worsen our fiscal mess while harming the economy.

The seven reasons provided by the video against this approach are as follows:

1) Tax increases are not needed;
2) Tax increases encourage more spending;
3) Tax increases harm economic performance;
4) Tax increases foment social discord;
5) Tax increases almost never raise as much revenue as projected;
6) Tax increases encourage more loopholes; and,
7) Tax increases undermine competitiveness

_____________________

Heck, I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more of our income?

By Everette Hatcher III | Also posted in Arkansas Times, Cato Institute, Current Events, spending out of control, Taxes | Comments (0)

Ernie Dumas:Arkansas’s growth has come when income taxes were raised

March 14, 2012 – 7:29 am

FACTS? WHO NEEDS EM? Rep. Terry Rice.

  • Rep. Terry Rice.

Terry Rice quoted my political hero Ronald Wilson Reagan in his speech last week. I have a son named Wilson Daniel Hatcher and he is named after two of the most respected men I have ever read about : Daniel from the Old Testament and Ronald Wilson Reagan.

One of the thrills of my life was getting to hear President Reagan speak in the beginning of November of 1984 at the State House Convention Center in Little Rock.  Immediately after that program I was standing outside on Markham with my girlfriend Jill Sawyer (now wife of 25 years) and we were alone on a corner and the President was driven by and he waved at us and we waved back.

My former pastor from Memphis, Adrian Rogers, got the opportunity to visit with President Ronald Reagan on several occasions and my St Senator Jeremy Hutchinson got to meet him too. I am very jealous.

On March 13, 2012 Max Brantley of the Arkansas Times pointed out some key points of an article by Ernie Dumas.

Dumas asserts:

Then the Republican candidate for speaker of the House, Rep. Terry Rice, made this pitch last week for his election—next year if his party wins enough House races: He and his party will see to it that the state income tax is cut so that the “depopulation of Arkansas” will end and the state can start to grow.

Depopulation? The state has been gaining population for 50 years and grew by 9.1 percent over the past decade. He said people were fleeing across the border to Texas and Tennessee to live to escape Arkansas’s income tax (and to live in communities with higher property and excise taxes). Texas does not have a personal income tax and Tennessee’s only applies to investment income. Arkansas lost population back in the days when its state and local taxes were the lowest in the United States.

That tax-and-growth record under Reagan and Bush? It was like that in Arkansas, too. When the current income tax rates were set, in 1971, and other taxes raised as well, the state set records for job growth the next three years. When Bill Clinton raised taxes in 1983 and 1987, we led the nation in manufacturing job growth. When Mike Huckabee cut capital gains taxes, the economy and the treasury fell into a slump…

Here is my response to these key points.

Ernie Dumas has beat on this drum over and over in the past, but the facts don’t support this view that Arkansas has benefited from having the high state income tax while bordering states like Tennessee and Texas do not have one. There is an effort to move from Arkansas to states that don’t have a state income tax.

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office. I am going to post some clips from his film series that demonstrate how powerful the private market is if you just get out-of-the-way and let it work.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1

Mike Huckabee  moved last year to Florida? Why? The answer is easy. Huckabee wants to avoid Arkansas’ high state income tax. Max Brantley of the Arkansas Times wants to call Huckabee a tax fugitive, but who can blame him.

Liberals like Brantley and Ernie Dumas want to praise former Arkansas governor Dale Bumpers for raising the state income tax to 7%, but that is the reason our state has the highest state income tax in the area (all bordering states have either lower state income taxes or no state income tax).

Is it any surprise that during the last census that the seven states that do not have an income tax grew in population? Arkansas has suffered from bracket creep and in 1929 you had to make 5 times the average wage to pay any state income tax at all, but now over 66% of tax payers in Arkansas pay at least some of their income at the 7% level.

Take a look at all the Milton Friedman clips that I have posted today. These liberals I mentioned above have truly forgotten how powerful the market is if not interfered with by the government.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 2

Ernie Dumas in his article “Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes effect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 3

Recently I read the report “A short history and recent trends in the Arkansas income tax,” by Richard Sims, Arkansas Business and Economic Review, December 22, 1993 and here is a portion of it:

Introduction

Since its introduction in 1929, Arkansas‘ statutory income tax structure has changed very little. However, due to changes in the economy and in inflation, the real effects of that tax structure has changed substantially. This report looks at the effects that rising incomes and inflation have had on the Arkansas income tax structure. In addition, the report looks at the changing profile of Arkansas taxpayers in recent years, and provides a brief comparison of Arkansas taxes in relation to other states and the federal tax system.

Arkansas‘ Income Tax Structure: Original and Revised

In 1929 Arkansas became 12th among the states to adopt an individual income tax. The structure contained five rates and net income brackets with a top rate of five percent applying to net income over $25,000. That original structure remained in place until 1971 when a new middle income bracket was added and the rate on net income over $25,000 was increased to 7.0 percent. The rates and brackets revised in 1971 remain in place today. The 1929 original and the revised current tax structure are shown in Table 1.

Table 1 Arkansas Individual Income Tax Structure

 1929 Original Net Income Rate first $3,000 1.0% 
next$3,001 to $6,000  2.0% 
next$6,001 to $11,000 3.0% 
next $11,001 to $25,000  4.0% 
over $25,000 5.0% 
1971 Revision (Current) 
Net Income Rate first $2,999 1.0%
 next$3,000 to $5,999 2.5% 
next$6,000 to $8,999 3.5% 
next$9,000 to $14,999 4.5% 
next $15,000 to $24,999 6.0%
 over $25,000 7.0%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research.

In 1975, the earliest year for which records on income tax collections by income group is available, only the top 4.0 percent of Arkansas taxpayers would have had any of their income subjected to the top 7.0 percent rate. By 1991, around 66.0 percent of the state’s taxpayers would have had some of their income subjected to this top rate–a rate once reserved for only the highest income earners.

The 1929 tax structure provided for exemptions of $1,500 for a single person and $2,500 for married individuals. In 1947 the state raised the exemption to $2,500 for singles and $3,500 for married persons. In 1957 the personal exemption was converted to a credit of $17.50 for singles and $35.00 for married persons. In 1987 the credits were increased to $20 per person. Finally, in 1991, low income Arkansans were exempted from paying income tax if their gross income did not exceed $5,500 for an individual or $10,000 for a married couple. For most taxpayers, the $20.00 credit remains in effect today.

The Value of Exemptions as a Share of Per Capita Income

Table 2 shows how the value of the personal tax exemption or credit has diminished over time. The figures shown represent the personal exemption or credit for a single individual as a ratio of the per capita personal income in the year in which the credit was first enacted. In 1929, for instance, an individual would have been exempted from any tax until their income reached a level which was equal to 490 percent of the Arkansas per capita income for that year. In 1947 with the first statutory change in the exemption, that individual would have still been exempted up to an amount equal to 340 percent of the per capita income level. By 1957 the value of the exemption (which was changed to a tax credit that year) had declined substantially, falling to 130 percent of per capita income. At the time of the next change in the personal credit (1987), the value of that credit was only 17 percent of the per capita income level. For most taxpayers (all those not officially classified as low income) in 1992, the value of the personal credit was only 13 percent of per capita income.

Table 2 Personal Exemptions and Credits As a Percent of Per Capita Income

 Arkansas Year of Value of Per Capita Enactment ExemptionIncome Ratio 1929 $1,500 $ 308 490% 19472,500 737 340% 19571,6001,247 130% 19872,000 11,980 17% 19922,000 15,439 13%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research; Per capita personal income data is from the Bureau of Economic Analysis, unpublished data, April, 1993.

In other words, whereas in the first year of enactment of the income tax, the personal exemption would have allowed an Arkansan to earn almost five times the average per capita income before paying any tax.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 4

____________________________________

In his article “Census: Fast growth in states with no income tax,” Washington Examiner, Dec 21, 2011, Michael Barone noted:
For those of us who are demographic buffs, Christmas came four days early when Census Bureau director Robert Groves announced on Tuesday the first results of the 2010 census and the reapportionment of House seats (and therefore electoral votes) among the states.

The resident population of the United States, he told us in a webcast, was 308,745,538. That’s an increase of 9.7 percent from the 281,421,906 in the 2000 census — the smallest proportional increase than in any decade other than the Depression 1930s but a pretty robust increase for an advanced nation. It’s hard to get a grasp on such large numbers. So let me share a few observations on what they mean.

First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.

Its population grew 21 percent in the past decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).

Texas’ diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.

There’s a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.

This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 5

By Everette Hatcher III | Also posted in Arkansas Times, Max Brantley, Taxes | Comments (0)

Ernie Dumas: Tax cuts explode deficits

January 20, 2012 – 1:35 pm

Ernie Dumas in the Arkansas Times, Jan 18, 2012 argued:

A big majority of Americans are concerned about growing income inequality and government favor for the rich, and they understand that lower taxes do directly affect federal budget deficits, which Republican orthodoxy for 30 years has denied.

However, I like most Republicans would argue the problem is spending and not taxes. Take a look at this video and article from the Cato Institute concerning Illinios’ recent experience.

Illinois Downgrade: More Evidence that Higher Taxes Make Fiscal Problems Worse

Posted by Daniel J. Mitchell

I don’t blame Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that your opponent really wasn’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls for agreeing to the hikes, but they say it’s the right thing to do because of all the government red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

European nations, for instance, have been raising taxes for decades, almost always saying the higher taxes were necessary to balance budgets and control red ink. Yet that obviously hasn’t worked. Europe’s now in the middle of a fiscal crisis.

So why do some people think we should mimic the French and the Greeks?

But we don’t need to look overseas for examples. Look at what’s happened in Illinois, where politicians recently imposed a giant tax hike.

The Wall Street Journal opined this morning on the results. Here are the key passages:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

…Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California.

…This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating. So much for that.

…And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

In other words, higher taxes led to fiscal deterioration in Illinois, just as tax increases in Europe have been followed by bad outcomes.

Whenever any politician argues in favor of a higher tax burden, just keep these two points in mind:

1. Higher taxes encourage more government spending.

2. Higher taxes don’t raise as much money as politicians claim.

The combination of these two factors explains why higher taxes make things worse rather than better. And they explain why Europe is in trouble and why Illinois is in trouble.

The relevant issue is whether the crowd in Washington should copy those failed examples. As this video explains, higher taxes are not the solution.

 

Uploaded by on May 3, 2011

This Economics 101 video from the Center for Freedom and Prosperity gives seven reasons why the political elite are wrong to push for more taxes. If allowed to succeed, the hopelessly misguided pushing to raise taxes would only worsen our fiscal mess while harming the economy.

The seven reasons provided by the video against this approach are as follows:

1) Tax increases are not needed;
2) Tax increases encourage more spending;
3) Tax increases harm economic performance;
4) Tax increases foment social discord;
5) Tax increases almost never raise as much revenue as projected;
6) Tax increases encourage more loopholes; and,
7) Tax increases undermine competitiveness

_____________________

Heck, I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more of our income?

By Everette Hatcher III | Also posted in Arkansas Times, Cato Institute, Current Events, spending out of control, Taxes | Comments (0)

Arkansas Highway Commission goes back on word

December 17, 2011 – 9:28 am
Max Brantley on 12-14-11 noted in his blog post  Highway Commission reneges on redistricting promise | Arkansas:

The Arkansas Highway Commission voted 5-0 today to renege on its promise to redraw the highway districts each commissioner represents to equalize population. The Commission had promised to redistrict in return for Sen. Jeremy Hutchinson’s agreement to drop a push for a constitutional amendment to end Highway Department independence.

The commission is, in short, a pack of liars. They claimed they couldn’t come up with a map, but any high school kid with a computer and the right software could have devised a map to give each commissioner’s two so-called “advocacy districts” roughly equal population. As it stands now, Commission Chair Madison Murphy of El Dorado gets $5 million to divide up among the 400,000 people his districts represent against the same money for the million or so people in Dick Trammel’s Northwest Arkansas districts. Murphy has opposed equalizing the districts from the start. You can see why. Legislators have argued it’s a simple equal representation issue.

Even legislators not on board Hutchinson’s original proposal don’t like high-handed state agencies that believe their power exceeds that of all the other branches of the government. (Remember the Game and Fish Commission flap?) There will be repercussions. Perhaps not in the fiscal session in 2012, but certainly in 2013 unless the Highway Commission rethinks. I understand members are already getting an earful.

Murphy tried to say the argument was about spending strictly on population, which he said wasn’t sound practice. It’s not sound practice, but that’s not the argument here. Some money is divided up based on districts, but an overwhelming majority is allocated statewide based on defined needs. Hutchinson has said he didn’t seek a change in funding formulas, but merely in the population placed in each of the 10 districts.

The Stephens article suggests the Commission only promised to study redistricting back in the session. Documents show, however, that the commission was “committed” to creating districts of equal population. The unsigned document at the link was created to signal the commission’s commitment and it was reported verbatim at the time. Following it on the link is the formal order.

________

The Arkansas Times reader  Theodosius commented on December 14, 2011 at 6:42 PM

This is another unintended consequence of term limits. Even the Highway Commission did not dare just lie to the General Assembly when Ed Thicksten, Ode Maddox, John Miller, Knox Nelson, and Jodie Mahony, etc were going to be back with long memories and longer futures.

________

On Arkansas Week in Review on 12-16-11, Ernie Dumas  of the Arkansas Times commented:

This is a dispute that has been going on since 1952 because of the The Mack-Blackwell Amendment, which made the Highway Commission independent,  and it was intended to end political interference with road-building in Arkansas… The Highway commission forms these ten districts, they are not bound by law, they just draw them up to suit themselves. 

Steve Barnes commented that all you would need to re-draw these 10 districts is a census map. Jay Barth of Hendrix noted:

It is these roads that have helped the most rural part of Arkansas really help stay alive. It is question of survival in these towns. Population does matter though… but population is not all that matters. Senator Hutchinson is pursuing this and did the commission harm their own independence by at least not at least taking a half step toward a solution?

 

By Everette Hatcher III | Also posted in Arkansas Times, Max Brantley | Tagged , , | Comments (0)

Dumas thinks we don’t need Balanced Budget Amendment but should balance it on our own

November 22, 2011 – 4:19 pm

In his recent article Ernie Dumas sticks to his guns that we should balance the budget without being forced to with a “Balanced Budget Amendment,” but I wonder how well that has worked so far?

I have made this a key issue for this blog in the past as you can tell below:

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 16 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 16 Thirsty Thursday, Open letter to Senator Pryor) Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 15 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 15 Thirsty Thursday, Open letter to Senator Pryor) Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 14 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 14 Thirsty Thursday, Open letter to Senator Pryor) Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 13 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 13 Thirsty Thursday, Open letter to Senator Pryor) Office of the Majority Whip | Balanced Budget Amendment Video In 1995, Congress nearly passed a constitutional amendment mandating a balanced budget. The Balanced Budget Amendment would have forced the federal government to live within its [...]

Mark Pryor not for President’s job bill even though he voted for it

Andrew Demillo pointed this out  and also Jason Tolbert noted: PRYOR OPPOSES THE OBAMA JOBS BILL THAT HE VOTED TO ADVANCE  Sen. Mark Pryor has been traveling around the state touting a six-part jobs plan that he says “includes a number of bipartisan initiatives, is aimed at creating jobs by setting the table for growth, encouraging new [...]

Senator Pryor responds to my “Thirsty Thursday” series of emails to him concerning the Balanced Budget Amendment

I have been blogging for 10 months now and have had over 110,000 hits on my blog. Posts encouraging Senator Pryor to cut spending have been responsible for more posts than any other subject. It has got the most hits too. I am hopeful that Senator Pryor will either pay attention to the people or [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 17 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 17 Thirsty Thursday, Open letter to Senator Pryor) Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 12 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my blog http://www.HaltingArkansasLiberalswithTruth.com I took you at your word and sent you over 100 emails with specific spending cut ideas. However, [...]

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 11 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 11 Thirsty Thursday, Open letter to Senator Pryor) Dear Senator Pryor, Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion). On my [...]

Mark Pryor voted for first stimulus but silent about second

The old political playbook will not work this time around. Bragging on Obamacare and the first stimulus in Arkansas will not do much for Pryor in 2014. In this clip above Senator Pryor praises Mike, Vic and Marion. (All three of those men bailed out and Marion and Vic were replaced by Republicans and in [...]

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , | Comments (0)

Dumas:Herman Cain’s 9-9-9 plan will not work

October 18, 2011 – 8:16 am

Senator Obama’s Social Security Tax Plan

Uploaded by on Jul 23, 2008

In addition to several other tax increases, Senator Barack Obama wants to increase the Social Security payroll tax burden by imposing the tax on income above $250,000. This would be a sharp departure from current law, which only requires that the tax be imposed on the amount of income needed to “pay for” promised benefits. But more important, at least from an economic perspective, the Senator’s initiative would increase the top tax rate on productive behavior by as much as 12 percentage points – and this would be in addition to his proposal to kill the 2003 tax rate reductions and further boost the top rate by 4.6 percentage points. This mini-documentary explains why a big tax rate increase on highly productive people would be very damaging to America’s prosperity, especially in a competitive global economy. Simply stated, pushing top tax rates in the United States to French and German levels means at least some degree of French-style and German-style economic stagnation. Visit http://www.freedomandprosperity.org for more information.

___________________________________________

Max Brantley wrote on the Arkansas Times Blog:

Dumas exposes Herman Cain’s 9-9-9 plan

Herman Cain is the hot Republican candidate at the moment, so Ernest Dumas’ examination of some of his ideas is timely. His easy 9-9-9 tax plan? The details aren’t so hot. More like appalling. 

He would replace all federal taxes—individual and corporate income taxes, and social security, Medicare, disability, unemployment, gasoline, cigarette and all other excise taxes—with three simple tax rates: 9 percent on personal income, 9 percent on business income and a 9 percent sales tax on all commercial activity. That sounds fair enough. There would be no exemptions and deductions. Well, only a few. Investment income—capital gains, interest and dividends, the income of the leisure class—wouldn’t be taxed at all. Your social security? Yes, tax it. As for the 9 percent business tax, it would apply only to the share of a company’s revenue that was spent on wages.It would be a mammoth tax cut for the rich and corporations and a giant tax increase for the middle class, the elderly and disabled.

_________________

I have to say that I am not able to go along with the sales tax portion myself. My views are closer to those of the Cato Institute below:

Herman Cain: How About 15-15-15?

 
PrintPresidential candidate Herman Cain has made a splash with his 9-9-9 tax reform plan. I love his 9 percent income tax, but the skunk at the tax reform picnic is his 9 percent retail sales tax. Mr. Cain is an articulate advocate of free enterprise and I wish him well in the contest, but he should ditch the sales tax.Adding a retail sales tax to the federal government’s powerful tax armada would be a terrible idea from a small-government perspective. Democrats are desperate to find ways to fund soaring entitlement costs, so it’s dangerous to give them conservative political cover to add a new federal funding source.Cain’s 9 percent business tax is also a problem. It is similar to a value-added tax (VAT) because would it disallow a business deduction for wages, which would make the base much broader than the corporate income tax base. And like a VAT, Cain’s business tax would apparently be imposed on all businesses, not just those currently paying the corporate income tax.The result would be that American businesses would be collecting a large tax on workers’ wages — but workers wouldn’t see this major government grab. One caveat is that the Cain business tax would allow a deduction for dividends paid, which would narrow the base compared to the standard VAT.

In sum, two of Cain’s three 9′s are bad ideas. His advocacy of lower marginal rates and reduced taxes on savings and investment are great, but he should drop the 9-9-9 plan.

Instead, Cain and other candidates should consider a 15-15-15 plan. At first blush, that doesn’t sound very appealing because the rates are higher than Cain’s. But the business tax base would be much smaller than Cain’s, and the plan would make existing revenue sources more visible and efficient. Here’s the 15-15-15 plan:

  • 15 Percent Payroll Tax. Cain would abolish the current 15.3 percent payroll tax that funds Social Security and Medicare. That’s odd because Cain — to his credit — is proposing a Chilean-style Social Security system with personal accounts. I’d keep the current payroll tax, but move to a Chilean-style system by allowing workers to put 6 percentage points or more of the tax into a personal account. That would feel like a tax cut for workers because they would retain ownership of the money. I would also require that all 15.3 percent of the tax be listed on employee pay stubs so that the burden is highly visible. Currently, workers only see half of the payroll tax, and thus might be unaware of the high cost of these retirement programs.
  • 15 Percent Personal Income Tax. Like Cain, I’d get rid of just about all deductions and other breaks under the income tax, except pro-savings features such as the 401(k) rules. It’s also reasonable to retain a substantial basic exemption for low-income filers, as under the Dick Armey/Steve Forbes “flat tax” plans. The Armey/Forbes plans had rates in the range of 17 to 20 percent, but they only taxed labor income at the individual level, not capital income. Technically, that is the right way to go under a flat tax, but as a bow to today’s political realities, we might want to tax wages, dividends, interest and capital gains all at 15 percent.
  • 15 Percent Corporate Income Tax. We should cut the 35 percent corporate income tax rate to 15 percent. People say we should trade a rate cut for loophole closing, but loophole closing is not worth the effort. Corporate loopholes are far smaller than loopholes in the individual code, and trying to scrap them just creates a blockade of business opposition to reform. Also, if we dropped the rate to 15 percent, the base would automatically broaden as businesses reduced their tax avoidance and evasion. Corporate profits parked offshore would flood back into the United States, and capital investment would get a huge boost. In the long-run, policymakers should consider switching to the simpler cash-flow business base under the Armey/Forbes flat tax, but if we cut the rate to 15 percent, the distortions caused by the current base would be greatly reduced anyway.

How much revenue would 15-15-15 raise? You could probably make it revenue-neutral by adjusting the basic exemption amount under the individual income tax. Dick Armey’s flat tax exemption was huge at about $35,000 for a family of four. A lower exemption amount makes more sense, but this is a variable that could be fine-tuned.

Of course, tax reform would be much easier if it created an overall tax cut. And that would be much easier to achieve if Congress cut spending. So I’d encourage Mr. Cain and the other candidates to roll up their sleeves and give us their detailed spending-cut plans. As a modest first step, how about a 9-9-9-9-9-9-9-9 plan to slice 9 percent off the budget of every federal agency?

This article appeared on The Daily Caller on October 14, 2011.

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By Everette Hatcher III | Also posted in Arkansas Times, Cato Institute, Max Brantley, President Obama, Social Security | Comments (0)

Brummett praises Dale Bumpers for raising Arkansas State Income Tax, Brantley accuses Huckabee of being “tax fugitive” for moving to Florida

June 4, 2011 – 12:23 pm

John Brummett wrote today:

If you start ranking the great governors of Arkansas, you talk about Win Rockefeller on seminal reform and on brave advancements in race relations. You talk about Dale Bumpers on raising income taxes and reorganizing government and advancing free textbooks and child immunizations and two-year community colleges.

Mike Huckabee recently moved to Florida? Why? The answer is easy. Huckabee wants to avoid Arkansas’ high state income tax. Max Brantley of the Arkansas Times wants to call Huckabee a tax fugitive, but who can blame him.

Liberals like Brantley and Ernie Dumas want to praise former Arkansas governor Dale Bumpers for raising the state income tax to 7%, but that is the reason our state has the highest state income tax in the area (all bordering states have either lower state income taxes or no state income tax).

Is it any surprise that during the last census that the seven states that do not have an income tax grew in population?Arkansas has suffered from bracket creep and in 1929 you had to make 5 times the average wage to pay any state income tax at all, but now over 66% of tax payers in Arkansas pay at least some of their income at the 7% level.

Ernie Dumas in his article ”Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes affect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.

 

Recently I read the report “A short history and recent trends in the Arkansas income tax,” by Richard Sims, Arkansas Business and Economic Review, December 22, 1993 and here is a portion of it:

Introduction

Since its introduction in 1929, Arkansas‘ statutory income tax structure has changed very little. However, due to changes in the economy and in inflation, the real effects of that tax structure have changed substantially. This report looks at the effects that rising incomes and inflation have had on the Arkansas income tax structure. In addition, the report looks at the changing profile of Arkansas taxpayers in recent years, and provides a brief comparison ofArkansas taxes in relation to other states and the federal tax system.

Arkansas‘ Income Tax Structure: Original and Revised

In 1929 Arkansas became 12th among the states to adopt an individual income tax. The structure contained five rates and net income brackets with a top rate of five percent applying to net income over $25,000. That original structure remained in place until 1971 when a new middle-income bracket was added and the rate on net income over $25,000 was increased to 7.0 percent. The rates and brackets revised in 1971 remain in place today. The 1929 original and the revised current tax structure are shown in Table 1.

Table 1 Arkansas Individual Income Tax Structure

 1929 Original Net Income Rate first $3,000 1.0% 
next$3,001 to $6,000  2.0% 
next$6,001 to $11,000 3.0% 
next $11,001 to $25,000  4.0% 
over $25,000 5.0% 
1971 Revision (Current) 
Net Income Rate first $2,999 1.0%
 next$3,000 to $5,999 2.5% 
next$6,000 to $8,999 3.5% 
next$9,000 to $14,999 4.5% 
next $15,000 to $24,999 6.0%
 over $25,000 7.0%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research.

In 1975, the earliest year for which records on income tax collections by income group is available, only the top 4.0 percent of Arkansas taxpayers would have had any of their income subjected to the top 7.0 percent rate. By 1991, around 66.0 percent of the state’s taxpayers would have had some of their income subjected to this top rate–a rate once reserved for only the highest income earners.

The 1929 tax structure provided for exemptions of $1,500 for a single person and $2,500 for married individuals. In 1947 the state raised the exemption to $2,500 for singles and $3,500 for married persons. In 1957 the personal exemption was converted to a credit of $17.50 for singles and $35.00 for married persons. In 1987 the credits were increased to $20 per person. Finally, in 1991, low income Arkansans were exempted from paying income tax if their gross income did not exceed $5,500 for an individual or $10,000 for a married couple. For most taxpayers, the $20.00 credit remains in effect today.

The Value of Exemptions as a Share of Per Capita Income

Table 2 shows how the value of the personal tax exemption or credit has diminished over time. The figures shown represent the personal exemption or credit for a single individual as a ratio of the per capita personal income in the year in which the credit was first enacted. In 1929, for instance, an individual would have been exempted from any tax until their income reached a level which was equal to 490 percent of the Arkansas per capita income for that year. In 1947 with the first statutory change in the exemption, that individual would have still been exempted up to an amount equal to 340 percent of the per capita income level. By 1957 the value of the exemption (which was changed to a tax credit that year) had declined substantially, falling to 130 percent of per capita income. At the time of the next change in the personal credit (1987), the value of that credit was only 17 percent of the per capitaincome level. For most taxpayers (all those not officially classified as low income) in 1992, the value of the personal credit was only 13 percent of per capita income.

Table 2 Personal Exemptions and Credits As a Percent of Per Capita Income

 Arkansas Year of Value of Per Capita Enactment ExemptionIncome Ratio 1929 $1,500 $ 308 490% 19472,500 737 340% 19571,6001,247 130% 19872,000 11,980 17% 19922,000 15,439 13%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research; Per capita personal income data is from the Bureau of Economic Analysis, unpublished data, April, 1993.

In other words, whereas in the first year of enactment of the income tax, the personal exemption would have allowed an Arkansan to earn almost five times the average per capita income before paying any tax.

By Everette Hatcher III | Also posted in John Brummett, Max Brantley, Mike Huckabee | Comments (0)

My problem with Matt Campbell (Part 1 of Series on Blue Hog Report)

May 27, 2011 – 8:43 am

Jason Tolbert & Matt Campbell

Jason Tolbert with The Tolbert Report and Matt Campbell with Blue Hog Report discuss legislation they’re glad didn’t pass in the recent regular session.

_______________________________________________

My problem with Matt Campbell is the same problem that I have with Ernest Dumas and Max Brantley. Don’t get me wrong. I want “The Blue Hog Report” to come back. Nevertheless, there is a problem that I have with these three journalists.  Take a look at the article, “Pious Profiteers,” Arkansas Times Blog, April 13, 2011, by Ernest Dumas:

Republicans were elected en masse last year to cut taxes and stop all the socialism and rampant spending…What happened was that an industrious blogger — a Democrat naturally — did something devilish to embarrass the self-styled penny pinchers. He unlocked the poorly kept secret that each of them was collecting far more in illegal salary supplements from the taxpayers…

The problem I have with Matt Campbell, Max Brantley and Ernest Dumas is very simple. They all three believe that Republicans are hypocrites for taking their pay in the same system that the Democratic leadership set up almost twenty years ago. They justify just being critical of the Republicans because they want to cut the size of government!!!!!! It is true they will occasionally mention that Democrats live under the same system, but they spend 99% of their time beating their drum about the Republicans!!!! Remember the control of all the branches of the government  in 1993 was in Democratic hands when these changes were made!!!!! The Republicans were just an afterthought.

Also I was interested  in why Campbell did not turn over his emails and why his Facebook page was shut down which would have easily shown the times of his posts while his website does not. The real issue is if he did his blogging while on the state’s time, and I think we all know the answer is yes. Why else is he shutting down his website and Facebook page and running for the woods? Again I will repeat that I do want the “Blue Hog Report” to return.

Jason Tolbert reported:

As has been reported, this week Republican Party of Arkansas executive director Chase Dugger filed a Freedom of Information Request regarding the employment records of bloggers Matt Campbell and Jeff Woodmansee…

Dugger confirmed that he filed three requests on behalf of the state party, two on Tuesday regarding Campbell’s current employment with the criminal coordinator’s office of the state Supreme Court and Campbell’s former employment at the Public Defender Commission and another on Thursday for Jeff Woodmansee’s employment at the Pulaski Law Library at UALR.

Campbell runs the website Blue Hog Report and his friend Woodmansee sometimes contributes guest blog posts. The website went off line shortly after the second request came on Woodmansee.

In an interview with the Tolbert Report on Thursday evening, Dugger said the party is still going through the returned documents and at this point is not completely sure what all it includes. He promise to provide copies of the request and the returned document on Friday.

“We wanted to make sure there was not partisan political activity taking place on state time,” said Dugger when asked what the purpose of the request and insisted it was not due to the fact that the bloggers were critical of Republicans. He held he would have filed the request even if Campbell and Woodmansee were conservatives if he believed they were blogging on state time.

When asked how they knew bloggers Campbell and Woodmansee were state employees he responded, “Do you think Matt Campbell and Zac Wright are the only ones that can do research?” When asked to clarify, he said the party had researched this after concerns were raised during the legislative session although he did not say specifically who had raised these concerns.

_____________________________-

I am not saying that Max Brantley, Ernie Dumas and Matt Campbell should not take up the subject of State Represenative and State Senator pay, but they should approach it in a balanced way. Now that Matt Campbell  is off the web for a little while, I will continue to read the writings of Brantley and Dumas like I have always done. I am sure Campbell will be back soon. At least I hope so.

By Everette Hatcher III | Also posted in Arkansas Times, Max Brantley | Comments (0)

Why do people move to other states to avoid Arkansas’ high state income tax? (If you love Milton Friedman then you will love this post)

May 3, 2011 – 8:46 am

http://www.freetochoosemedia.org/production/POC/presskit2/milton-president-reagan.jpg

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1

Mike Huckabee recently moved to Florida? Why? The answer is easy. Huckabee wants to avoid Arkansas’ high state income tax. Max Brantley of the Arkansas Times wants to call Huckabee a tax fugative, but who can blame him.

Liberals like Brantley and Ernie Dumas want to praise former Arkansas governor Dale Bumpers for raising the state income tax to 7%, but that is the reason our state has the highest state income tax in the area (all bordering states have either lower state income taxes or no state income tax).

Is it any suprise that during the last census that the seven states that do not have an income tax grew in population? Arkansas has suffered from bracket creep and in 1929 you had to make 5 times the average wage to pay any state income tax at all, but now over 66% of tax payers in Arkansas pay at least some of their income at the 7% level.

Take a look at all the Milton Friedman clips that I have posted today. These liberals I mentioned above have truly forgotten how powerful the market is if not interferred with by the government.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 2

Ernie Dumas in his article “Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes effect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 3

Recently I read the report “A short history and recent trends in the Arkansas income tax,” by Richard Sims, Arkansas Business and Economic Review, December 22, 1993 and here is a portion of it:

Introduction

Since its introduction in 1929, Arkansas‘ statutory income tax structure has changed very little. However, due to changes in the economy and in inflation, the real effects of that tax structure have changed substantially. This report looks at the effects that rising incomes and inflation have had on the Arkansas income tax structure. In addition, the report looks at the changing profile of Arkansas taxpayers in recent years, and provides a brief comparison of Arkansas taxes in relation to other states and the federal tax system.

Arkansas‘ Income Tax Structure: Original and Revised

In 1929 Arkansas became 12th among the states to adopt an individual income tax. The structure contained five rates and net income brackets with a top rate of five percent applying to net income over $25,000. That original structure remained in place until 1971 when a new middle income bracket was added and the rate on net income over $25,000 was increased to 7.0 percent. The rates and brackets revised in 1971 remain in place today. The 1929 original and the revised current tax structure are shown in Table 1.

Table 1 Arkansas Individual Income Tax Structure

 1929 Original Net Income Rate first $3,000 1.0% 
next$3,001 to $6,000  2.0% 
next$6,001 to $11,000 3.0% 
next $11,001 to $25,000  4.0% 
over $25,000 5.0% 
1971 Revision (Current) 
Net Income Rate first $2,999 1.0%
 next$3,000 to $5,999 2.5% 
next$6,000 to $8,999 3.5% 
next$9,000 to $14,999 4.5% 
next $15,000 to $24,999 6.0%
 over $25,000 7.0%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research.

In 1975, the earliest year for which records on income tax collections by income group is available, only the top 4.0 percent of Arkansas taxpayers would have had any of their income subjected to the top 7.0 percent rate. By 1991, around 66.0 percent of the state’s taxpayers would have had some of their income subjected to this top rate–a rate once reserved for only the highest income earners.

The 1929 tax structure provided for exemptions of $1,500 for a single person and $2,500 for married individuals. In 1947 the state raised the exemption to $2,500 for singles and $3,500 for married persons. In 1957 the personal exemption was converted to a credit of $17.50 for singles and $35.00 for married persons. In 1987 the credits were increased to $20 per person. Finally, in 1991, low income Arkansans were exempted from paying income tax if their gross income did not exceed $5,500 for an individual or $10,000 for a married couple. For most taxpayers, the $20.00 credit remains in effect today.

The Value of Exemptions as a Share of Per Capita Income

Table 2 shows how the value of the personal tax exemption or credit has diminished over time. The figures shown represent the personal exemption or credit for a single individual as a ratio of the per capita personal income in the year in which the credit was first enacted. In 1929, for instance, an individual would have been exempted from any tax until their income reached a level which was equal to 490 percent of the Arkansas per capita income for that year. In 1947 with the first statutory change in the exemption, that individual would have still been exempted up to an amount equal to 340 percent of the per capita income level. By 1957 the value of the exemption (which was changed to a tax credit that year) had declined substantially, falling to 130 percent of per capita income. At the time of the next change in the personal credit (1987), the value of that credit was only 17 percent of the per capita income level. For most taxpayers (all those not officially classified as low income) in 1992, the value of the personal credit was only 13 percent of per capita income.

Table 2 Personal Exemptions and Credits As a Percent of Per Capita Income

 Arkansas Year of Value of Per Capita Enactment ExemptionIncome Ratio 1929 $1,500 $ 308 490% 19472,500 737 340% 19571,6001,247 130% 19872,000 11,980 17% 19922,000 15,439 13%

Source: Arkansas Legislative Tax Handbook, 1992, Bureau of Legislative Research; Per capita personal income data is from the Bureau of Economic Analysis, unpublished data, April, 1993.

In other words, whereas in the first year of enactment of the income tax, the personal exemption would have allowed an Arkansan to earn almost five times the average per capita income before paying any tax.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 4

____________________________________

In his article “Census: Fast growth in states with no income tax,” Washington Examiner, Dec 21, 2011, Michael Barone noted:
 
For those of us who are demographic buffs, Christmas came four days early when Census Bureau director Robert Groves announced on Tuesday the first results of the 2010 census and the reapportionment of House seats (and therefore electoral votes) among the states.

The resident population of the United States, he told us in a webcast, was 308,745,538. That’s an increase of 9.7 percent from the 281,421,906 in the 2000 census — the smallest proportional increase than in any decade other than the Depression 1930s but a pretty robust increase for an advanced nation. It’s hard to get a grasp on such large numbers. So let me share a few observations on what they mean.

First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.

Its population grew 21 percent in the past decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).

Texas’ diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.

There’s a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.

This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 5

By Everette Hatcher III | Also posted in Arkansas Times, Max Brantley, Mike Huckabee, Milton Friedman | Comments (0)
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