How Did We Miss this Capital Gains Tax Rip-Off?

Mark speaks for the “Bring it Home” chapter of Neighbors, and not Neighbors as a whole*

I was reviewing the legislation for the “Middle Class Tax Cut” that Governor Hutchinson, President Pro Tem Dismang, and the rest of the legislature are getting so much credit for.  Here is the text of that bill (SB6). Now I want to be clear, I am not complaining about that bill.  If I had gotten to vote on it, I probably would have voted for it too, if it was the only way to undo the awful scam from 2013 which I am about to tell you about.

That being said, I must tell you, there has been no “middle class tax cut”.  At least not yet.  I call it a wimpy tax cut because it could be summed up as “”I will gladly cut your taxes Wednesday for a tax increase today!” The bill simply reorganizes the income tax table in a way that would break even for taxpayers in 2015, but raises capital gain tax rates immediately.  If the legislature does not change it again by then, you can expect a modest income tax rate cut in 2016, and capital gains taxes to stay higher.

My fear is that the administration will claim that if we don’t go along with keeping Medicaid expansion then they will have to undo the tax “cuts.” Again this a tax “cut” that so far is only a tax increase on capital gains, but for which they have harvested huge amounts of political credit as a tax cut.  We will see.

The number one reason I might have voted for SB6 is that it undoes a huge injustice, maybe even rising to the level of a crime, put into the tax code in 2013 via HB1966. If you will read the last page of that bill you will see that it says that starting January 1st of 2014 a net capital gain of over ten million dollars is exempt from income taxes!  It cut the rates for all capital gains, even for us regular folks, but it let the big boys totally off the hook.  I am not a fan of taxes, but if you have to do them, do them with equity and justice. This was the ultimate regressive tax.

The lead sponsor of HB 1966 was the infamous Davy Carter.  The lone co-sponsor in the house was (R) Charlie Collins of Fayetteville, and the lone co-sponsor in the Senate was (R) Jonathan Dismang, now President Pro Tem of the Senate.  I contacted Collins and he explained the provision and his reason for supporting it- which was basically that players on this level could set up these giant deals wherever they wanted, and he felt like taxing them only on the first ten million dollars of revenue was a way to keep some of those deals at home and the state could at least get something.  I think there are other ways to do it, but at least he is consistent. None of that though, explains what Dismang did next.

That was for tax year 2014.  Now let’s look at what just happened with SB6.  The last part of that bill undid what HB 1966 did regarding the tax break for billionaires.  It deleted the language put in for 2014.  In other words, in 2014 and 2014 only, the big boys got a chance to take capital gains tax free, an opportunity denied to us small fry. Then in 2015, it was pulled away.  Any big players who knew these changes were going to happen could unfairly benefit. They could plan on taking their capital gains in 2014.  Even the big boys who did not know it would be yanked away in 2015 would be caught flat-footed.

It is not easy to put together enough big deals so that the capital gains for it alone are in excess of ten million dollars- the only group let of the hook from paying such taxes.  I cannot help but wonder if certain big interests set this thing up.  That is, they planned in 2013 to harvest a huge amount of capital gains in 2014.  So they got the law changed for them to do so tax-free in that year.  The purpose of the special favor was served, so at the start of 2015 the law was changed back so that the special exemption for huge gains was erased.

What really adds weight to my suspicions is that the lead sponsor of SB 6, the bill that erases the special exemption for huge gains, is Senator Jonathan Dismang.  This is the same fellow who was the lone senate co-sponsor of HB 1966, the bill which two years ago put that special exemption in.  Jonathan Dismang was lead sponsor of a bill to take out language that he himself put into the law only two years before.

Someone who is a full time journalist, to the extent we still really have those anymore, ought to see which Arkansas players “cashed out” with huge capital gains in 2014, then compare that to who gave money to causes friendly to Senator Dismang.  With that information in hand, a journalist would be well prepared to ask the President Pro Tem of the Arkansas senate what he was thinking when he decided to be the sole Senate co-sponsor of a bill which would tax middle class persons at a significantly higher rate than it would global corporations which took over ten million dollars worth of capital gains in 2014.  Then when they hear his explanation, a reasonable follow-up question might be “if it was such a good idea in 2013, why were you in such a hurry to be the lead sponsor of SB 6, a bill which undid that good idea in here in 2015?

Jonathan Dismang was voted as President Pro Tem of the Senate despite complaints from the grassroots that one of the architects of the Private Option should not be promoted.  Not after the voters spoke so loud and clear. The Republican Senators were listening to someone, but not the grassroots when they stuck with Dismang.  If Dismang made some very rich people/corporations even richer with his shenanigans with the tax code, it could be a factor in why he, of all the Republican state senators, got the nod for Pro Tem.

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*Neighbors represents people from across the political spectrum.  While we may not agree on all issues, we all want to clean up this corrupt political system. Neighbors of Arkansas is organized into chapters, and each one has its own view of things. Opinions from one chapter are not necessarily endorsed by the others.  We call this model “working together separately.”


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