Thursday, March 19, 2009

Is the Arkansas tax code archaic or draconian?

As usual, I'm hopping mad.

That happens regularly, of course, but I'm angrier than normal. Dig this.

A few weeks ago, we bought my wife a new Toyota Sienna minivan. Rather than finance the sales tax on the thing, we decided to go ahead and just pay it.

This week, then, we wrote a check for $1,900 to cover the taxes on the thing. Had we not been able to deduct the value of the trade in (a 2000 Saturn that my wife has driven to death), we would have paid $2,900 in sales taxes.

So, just what the hell is going on here? Why in God's name are sales taxes on new vehicles so high in Arkansas?

Before I tackle all of that, let me mention a couple of things. The maximum sales tax on a new vehicle in this state is 11.5 percent, meaning Arkansas might be one of the poorest states in the country, yet buying a new car here costs more than it does in most other parts of the nation.

Figuring out which state has the highest tax rate can get a bit confusing as it is fairly common to find a low tax rate -- or no tax at all -- on vehicles, but registration fees might be high. In Arizona, for example, you get the worst of both worlds -- a maximum sales tax of 10.73 percent and a registration fee of $568. In Arkansas, at least it only costs $34 a year to register my wife's van.

Regardless, there are a lot of states that choose low registration fees and low sales taxes. That, it seems, is the wise approach to take when you're dealing with a struggling economy. If it is urgent to convince people to run out and buy things like new vehicles, why on earth would you choose to tax the heck out of them?

And, folks, this new sales tax is very recent and came about as the result of the shell game that all politicians just love to play. About a decade ago, a serious movement was afoot to get rid of the sales tax on food in Arkansas.

Gov. Mike Beebe, when he was running for office back in 2006, promised to cut the sales tax on groceries. He kept his promise and cut it down to 3 percent. Of course, the governor and our legislators crowed about how great that all was.

What they weren't so vocal about was that the tax was simply shifted to other things. Therefore, taxes on new cars went through the roof, meaning that sales tax on groceries doesn't benefit you one whit if you run out and buy a new car (we charge sales tax on used cars here, too, but that's another story).

I'm not sure if cutting taxes in one area and jacking them up in others is a tax break at all. It's more of a con, really, but none of us should be surprised. The government is great at stealing our money, but not too keen on cutting us a bit of slack when times are tough.

That's just how things go here in Arkansas. Here's another example of how screwed up taxes are here. As part of my job, I'm in charge of my organization's trade magazine. We've printed that thing in Missouri for years.

Why? Because we don't have to pay sales tax in Missouri, but we do have to pay it if we're dealing with a printer based in Arkansas. Would we like to go with a local printer? Of course we would. However, we're also very interested on finding a printer that will produce a quality magazine at the lowest price possible (that's just good business).

We've solicited bids for years from Arkansas printers, but they simply can't compete in terms of price. It's odd that this state would be so hostile toward its own companies, but that's the reality that printers -- and most businesses -- functioning in this state have to deal with on a daily basis.

It's worth mentioning that we have found an Arkansas printer to take over our magazine, but that company had to cut its quote to the bone and I'm certain it won't realize much of a profit out of our contract. I'm certain, however, that particular company is thrilled to help support a state government that is downright hostile toward it.


Rebecca said...

Wow, that is awful! But remember, it can't be as bad there as it is here in New York State, the Empire State. We lead the nation in sinking a state, real fast.

Hope AK bucks the trend...

The Natural State Hawg said...

Rebecca -- Actually, it's cheaper to buy a new car in New York than here because of the ridiculously high sales tax rate in Arkansas.

Crazy, huh?

Da Old Man said...

One of the problems we have is this, because our tax rate is high (ok, not as high as yours, but still 7% is nothiong to sneeze at when making a 20K purchase) it simply had folks do what your company did with printing--go elsewhere. Our state weaseled around it by charging no matter where the car was bought.
BTW, I inherited a car, and had to pay sales tax on that. Go figure.

The Natural State Hawg said...

Crotchety -- Wow! So does that leave you with the situation where you could pay sales tax on a car both where you bought it and in your scenic home state of New Jersey? That would suck. How did New Jersey justify that?

Ah, yes. The good ole death tax on that car, huh? God knows the government wants to get its greasy paws on every transfer at all.


HealthNutWannabeDad said...

Most people will not realize how high is the sales tax, as they finance the entire thing. Good for you for pointing it out.

By the way, the sales tax rate here in Faulkner County on everything is 8.25%, one of the highest rates in Arkansas.

I think the shifting of taxes from things like groceries to high ticket items such as cars, is not only another way for politicians to fool the voters, as you pointed out, but yet another way for them to "soak the rich" or those who are in a better position to buy a new vehicle in Arkansas.


Eat Well. Live Well.

Denford said...

It's enough to make you wish for the days of Governor Clinton, doesn't it.
At least he got kicked in the teeth when he tried raising them car taxes first time and he would never ever repeat such a mistake, ever.

So, come clean Hawg, how many time did you vote for Clinton for Governor?

The Natural State Hawg said...

Paul -- When I was living in northwest Arkansas, the sales tax in Fayetteville was 10 percent (maybe 10.5 percent -- it was a long time ago). That's just insane.

I think it's pitiful that the government can't just cut taxes. It has to shift taxes to something else in spite of the fact that Arkansas has been running a surplus for as long as anyone can remember.

Denford -- Nothing will make me miss Bill Clinton. He's white trash even by Arkansas standards, and that's saying something.

I never voted for him at all (bear in mind I wasn't old enough to vote until 1990). I did manage to work in Tom McRae's campaign in 1990 (he was a Democrat running against Clinton in the primaries) and Sheffield Nelson's campaign (he was the Republican challenger for the governor's office in 1990).

I absolutely detest Clinton. Bill Clinton, Jimmy Carter and Ronald Reagan, in fact, are the three main reasons I tend to vote Republican.