Poll of the week: TAXES
I frequently receive e-mail from folks with ideas to overhaul the current tax system in Arkansas. Many economists will tell you that the most stable revenue for government comes from three major sources, sort of like a three-legged stool being more easily balanced that a two-legged one -- the three major sources being a sales tax, an income tax, and an ad valorem property tax. This is sort of the approach Arkansas takes. In the last fiscal year, Arkansas took in approximately 54% of its General Revenue from income tax (both corporate and individual) and 41% from sales and use tax. The other 5% comes from insurance, special, and other taxes. While ad valorem property taxes are not imposed by the state, property taxes are assessed and levied in Arkansas at the county and municipal levels and are administered by the state.
Other states in the region don't use this model. Texas, for instance, doesn't have an income tax. They will rip your head off on property taxes (the largest source of funding for local services in Texas), but they don't impose an income tax on individuals or businesses. Arkansas, on the other hand, ranks 50th in terms of property taxes among the 50 states and DC. Texas also imposes other taxes that don't exist in Arkansas. For instance, I am required to pay an annual occupation tax of $200.00 for being an attorney licensed in Texas. Let's say spending remainds the same. Would you be in favor of repealing the state income tax if it meant increasing or imposing other taxes, such as a state-imposed ad valorem tax on real estate and personal property?
After some research, I understand that the amount of funds generated by the property tax among the 75 counties in Arkansas is roughly $1.5 billion. You'd have to triple current property taxes to replace the $2.95 billion generated by the Arkansas income tax.
For a family living in a $150,000 home in the Texarkana, Arkansas School District, that would mean the real estate taxes would increase from $1,650 to $4,950. The personal property taxes would also triple. From the example above, let's say the family has a couple of vehicles and a boat, motor and trailer valued at $50,000. That family's personal property taxes would increase from $550 to $1,650. The total property taxes for this person would increase from $2,200 to $6,600.
Other states in the region don't use this model. Texas, for instance, doesn't have an income tax. They will rip your head off on property taxes (the largest source of funding for local services in Texas), but they don't impose an income tax on individuals or businesses. Arkansas, on the other hand, ranks 50th in terms of property taxes among the 50 states and DC. Texas also imposes other taxes that don't exist in Arkansas. For instance, I am required to pay an annual occupation tax of $200.00 for being an attorney licensed in Texas. Let's say spending remainds the same. Would you be in favor of repealing the state income tax if it meant increasing or imposing other taxes, such as a state-imposed ad valorem tax on real estate and personal property?
After some research, I understand that the amount of funds generated by the property tax among the 75 counties in Arkansas is roughly $1.5 billion. You'd have to triple current property taxes to replace the $2.95 billion generated by the Arkansas income tax.
For a family living in a $150,000 home in the Texarkana, Arkansas School District, that would mean the real estate taxes would increase from $1,650 to $4,950. The personal property taxes would also triple. From the example above, let's say the family has a couple of vehicles and a boat, motor and trailer valued at $50,000. That family's personal property taxes would increase from $550 to $1,650. The total property taxes for this person would increase from $2,200 to $6,600.
In contrast, a $150,000 home in Hillcrest in Little Rock School District, the real estate taxes would increase from $2,070 to $6,210. The personal property taxes on items valued at $50,000 would increase from $690 to $2,070. The total property taxes for this Little Rock family would increase from $2,760 to $8,280.
If the Texarkana family above has a household income of roughly $63,000 (with no corporation -- no corporate income taxes), it's a wash, based on the current income tax brackets in Arkansas. If the Little Rock family above has a household income of roughly $79,000, it's a wash. Would you be in favor of repealing the Arkansas income tax and imposing a state ad valorem property tax in its place that would triple your current property tax obligation? If you are in favor of this, do you (a) think it would attract more residents and businesses to the state, and/or (b) worry that revenue collections would be less stable than the current system?
If the Texarkana family above has a household income of roughly $63,000 (with no corporation -- no corporate income taxes), it's a wash, based on the current income tax brackets in Arkansas. If the Little Rock family above has a household income of roughly $79,000, it's a wash. Would you be in favor of repealing the Arkansas income tax and imposing a state ad valorem property tax in its place that would triple your current property tax obligation? If you are in favor of this, do you (a) think it would attract more residents and businesses to the state, and/or (b) worry that revenue collections would be less stable than the current system?
Previous polls:
Poll No. 9: Digital billboards in Arkansas
Poll No. 8: Partisan primaries
Poll No. 7: Notification of MRSA infections
Poll No. 6: "No match" letters
Poll No. 5: Novelty lighters
Poll No. 4: 2007 Razorbacks
Poll No. 3: Governor Beebe's job performance
Poll No. 2: The severance tax
Poll No. 1: Flavored cigarettes
posted by Steve Harrelson @ 12/11/2007 09:07:00 AM | Permalink |
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