Tuesday, February 22, 2011

CAPITAL GAINS and the $44.5 Myth~ Where's the Press~

Why haven't we read this in the press about the Capital Gains Tax Cut? 

 Most of the stories that I have seen in the media over the HB1002 filed by Rep. Ed Garner are talking about this huge loss of revenue of 44.5 million dollars. But have you read this?~

Sent to me by Rep. Garner~

The 44.5 Million Dollar Myth

DFA has projected a 44.5 million dollar impact on revenue of the 2013 fiscal year when HB1002 passes.  There is no, can be no, impact on the 2012 budget. Zero.  Let's examine the fantasy of this assumption.  It is important to understand this equation because many State funded agencies, most notably, Higher Education has been told that their budgets will be cut to make up for the imaginary loss of revenue.  It is unfortunate that political rhetoric has obscured the facts of this important legislation for job creation in Arkansas.

This is what would have to happen…..

In order to affect the 2013 Budget, capital investments would have to be made in Arkansas after July 1, 2011 through Dec. 30, 2011.  A six month window.  Those investments would have to be held for over one year and sold in the six month window of July 3, 2012 through Dec. 31, 2012.

The equation for this impact is as follows…

Capital Gains from NEW Arkansas investments made July 2, 2011 through Dec 30, 2011, held for over 1 year     minus     30% of the gain and sold at a profit July 3, 2011 through Dec 31, 2011                               (current exclusion)

equals   Capital Gains taxed at AR income tax rates for the taxpayer
                  (this is running at an effective rate of 6%)

So…… to have an impact of 44.5 million dollars this must be the equation….

1.064 Billion Gains - 319 million (30% exclusion) = 744.67 million x 6% (effective) = 44.5 million

Assuming an average 10% return, 10.64 Billion would have to be invested and sold in Arkansas investments with 6 month windows for the buy and sell.

If even as much as HALF of all Arkansas investment made could be sold at an average 10% profit after one year…. Total investments in Arkansas in the second half of 2011 would equal 21.28 Billion in new investments in Arkansas.

This is simply not possible. This is a myth.  Will the media report this?  What is the response of Higher Ed who has been told their budgets will be cut?

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