Sunday, March 06, 2011

Another Republican-Sponsored Non-Tax Increase that Will Result in You Paying More Taxes

I was willing to give them the benefit of a doubt on SB341, which allowed for charging for licenses to state medicaid providers if the feds would reimburse them for those licenses. I concluded the bill would contribute to our federal budget problems, and our federal representatives ought to fix it. I was not as ready to castigate our state legislators for taking the "free" money our corrupt federal government was offering.

But now one of them is at it again. Sen. Jake Files is sponsoring a bill that will not technically raise taxes, but it will result in us paying more taxes nevertheless. It's SB738, which changes collection responsibilities on internet sales taxes. Tolbert reports on the background of this bill of dubious constitutionality.

The bottom line is that while people still technically owe sales taxes for internet sales, the average person and maybe even the average legislator, would not know how a person would pay the state the sales taxes for their internet sales. If anyone knows how you would pay such sales taxes, please post it here. Traditionally there has been no effort made to collect these taxes. As such, this bill would be a de facto tax increase even if it is not a technical one.

I sympathize with brick and mortar businesses who are losing out to internet sales. Sure, they could offer internet sales too, but this puts us in the absurd position of buying from a distance instead of locally because high taxes make it less expensive to ship than to pay a sales tax. People in Nebraska would then order their goods from a shop in Sheridan and people here would buy from someplace in Springfield.

The root problem is government intervention that is so great that it distorts the market and leads to a miss-allocation of resources. That is, sales taxes in Arkansas are too high. That's the problem, not internet sales. The solution is to change the tax structure of this state. We should shift away from sales taxes and more to income taxes and user fees, so long as it is done in a revenue-neutral way. Sen. Files bill is not revenue neutral, despite the static calculations of the Department of Finance and Administration. If the sales tax in this state was 3% or less, it would remove much of the financial incentive to buy from the internet. Sen. Files is simply attempting to use more government intervention to resolve a problem caused by government intervention in the first place.

I am not saying that it will be easy to restructure our tax code, I'm saying that its right. Our state founders in their wisdom, called for a super-majority vote in the legislature to pass a tax increase. Sorry judges later ruled that this only applied to taxes that were in existence at the time the Constitution was enacted- and there was no sales tax at that time. So what happened was every time the ledge wanted to bleed us a little more, they voted to increase sales taxes, which needed only a majority vote. An income tax increase required a super-majority.


Anonymous Anonymous said...

Your post says that the Arkansas Constitution said that it took a supper majority to rais taxes when it was written. So I got a copy of the 1874 Constitution as it was written in 1874. I have looked and looked for what you are talking about. No where in Article V (Legislative) or in Article XVI (Finance and Taxation) do I find what you made refrence too. Could you please tell me what Article and section you found that in and when (date) that bad judges made their ruling. Thanks!

12:42 PM, March 06, 2011  
Blogger Mark Moore (Moderator) said...

The original would be article 5 Section 31. That one provided for a 2/3rds majority to raise taxes.

In 1934 the voters put in the 19th amendment which became section 38 of article 5. It moved it up to a 3/4ths requirement, and then only in "emergencies." A vote of the people was the standard way taxes were to be raised by that amendment.

Not sure when the ruling was, but by 1941 the ledge passed the first sales and use tax, so sometime between 34 and 42.

3:52 PM, March 06, 2011  
Anonymous Anonymous said...

Thank you for getting back to me Mark. I simply overlooked it this morning. I am personally am opposed to the sales tax being the primary means of raising money for the state. I believe it is a regressive tax that hurts those who can afford it the worst. We need tax reform in this state to make our system better. The way both Dems and the GOP are going about this in the leg will not work in the end. We need more common sense people in Little Rock not more radicals on either side.

4:45 PM, March 06, 2011  
Blogger Mark Moore (Moderator) said...

Well, you know I feel the same way. I called for getting away from relying on the sales tax in the piece. Trouble if we get more reliance on the sales tax from Republicans and Democrats alike, who else is there?

4:59 PM, March 06, 2011  
Anonymous Anonymous said...

I know the feeling, I support the Republicans. The trouble is I dont like the Tea Party and elements like that on other issues. What are we to do?

7:45 AM, March 07, 2011  

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