Favorite

Fake economics 

Fake news is a new phenomenon in the world of politics and policy, but hokey economic scholarship has been around as long as Form 1040 and is about as reliable as the news hoaxes that enlivened the presidential campaign.

With the legislature assembling soon to tackle tax and spending issues, the old notion of corporate and personal income tax cuts as the magic bullet for a poor state arrived right on time the other day at the Capitol, as it has for the past 50 years. Economic salvation is always based on the studies of the Tax Policy Foundation, a "think tank" organized right before World War II by America's largest corporations to promote tax and regulatory policies favorable to big business and its owners and executives.

This time, the local purveyor of the scheme is the 2-year-old Arkansas Center for Research in Economics at the University of Central Arkansas's College of Business. Its professors and researchers are funded by the Koch brothers (2016 net worth $82 billion, Forbes) and perhaps other right-wing philanthropists. Americans for Prosperity, the Koch brothers' advocacy front, issued a release praising the center's study, "Arkansas: A Road Map for Tax Reform," when the professors presented it to Republican legislators, who are hungry for expert support for their cherished goal of reducing taxes on big businesses and the well-to-do.

The academicians quizzed rank-and-file Arkansans, studied the tax rates, read the Tax Policy Foundation's annual reports and concluded that Arkansas was an economic wasteland because its income tax and taxes on manufacturers gave it one of the worst business climates in America. Lower those taxes, eliminate the little corporate franchise tax and then raise property and sales taxes on ordinary workers to offset the loss of tax receipts, they said, and industry will fight to get to Arkansas and hire people. Never again, they said, will Arkansas have to spend hundreds of millions to bribe a steel mill and a Chinese paper maker to come to Arkansas.

That made perfect sense to lawmakers and Governor Hutchinson, who want to get another tax cut under their belts before the next election. But you are probably dubious, and you should be. It is all based on phony numbers, hokey analysis and economy theories that fly in the face of most economic scholarship except that of the Tax Foundation, Americans for Prosperity and their sponsors.

First, let's get one small issue out of the way. The UCA economists agreed that the state needed tax receipts to pay for desirable things like highways and UCA, so the cuts in individual income taxes and sales taxes paid by manufacturing companies needed to be offset by hiking property taxes on your homes and businesses and by raising the sales tax and expanding it to cover services like your doctor visit, hairdresser, barber and dry cleaner. The legislature can do all that quickly and by spring Arkansas will become the promised land for corporations and individuals. Well, our constitution prohibits the legislature and governor from raising property taxes, and you can't find five legislators who will vote to tax services. Gov. Winthrop Rockefeller found exactly one in 1969, when he tried desperately to raise taxes to improve the civilization of his adopted state.

The professors' report was based on the Tax Foundation's 2016 business climate index, which purports to record all the tax collections of each state and rank them from 1 to 50 based on its own perverse formula, not on taxes the states actually collected. The Tax Foundation considers a high-tax state one that has a graduated personal income tax and a low-tax state one having no income tax or a flat one. Texas and Alaska are low-tax states because they have no income tax but reap huge sums from stratospheric tax rates on oil and gas production.

Arkansas ranks 38th and the professors said their elixir would bring it to promised-land status next year. Next fall there will be jobs galore. The states that industry and individuals are supposed to be fleeing to are the best 10 tax climates: Wyoming, South Dakota, Alaska, Florida, Nevada, Montana, New Hampshire, Indiana, Utah and Oregon. Wait ... only one, New Hampshire, has a lower jobless rate than Arkansas. Only one, Florida, has more headquartered Fortune 500 companies than poor Arkansas.

Booming states like California and Maryland are at the bottom of the Tax Foundation's business climate index owing to their high graduated income taxes. The comparisons get more absurd.

The bedrock assumption in the professors' and the Tax Foundation's reports is that low taxes and cutting taxes produce growth and that the opposites always produce stagnation.

You don't have to be a scholar but only a casual observer to see the foolishness of the theory. Big tax cuts at both the national and Arkansas levels the past 40 years have nearly always been followed by recessions and stagnation while modest tax increases have usually been followed by growth. Go figure.

The indisputable fact is that state and local taxes are far down the list of considerations for job-creating investment — behind a skilled or educated work force, proximity to markets, raw materials and suppliers, climate, transportation infrastructure, affordable and reliable energy and, yes, things like the levels of bigotry and acceptance.

The Arkansas legislature will buy the professors' theories because that is what they long to hear. Except the part about taxing services and property.

Favorite

From the ArkTimes store

Speaking of Arkansas Center For Research In Economics

Comments (4)

Showing 1-4 of 4

Add a comment

 
Subscribe to this thread:
Showing 1-4 of 4

Add a comment

More by Ernest Dumas

  • Trusting

    It is a Fourth of July ritual to appraise where we are in meeting the Declaration of Independence's promise to institute a government that would, unlike King George, secure human rights equally for everyone who sets foot on American soil.
    • Jul 6, 2017
  • Obamascare

    Republicans at long last may be about to see their most fervent wishes and wildest predictions materialize — millions of people losing their medical and hospital coverage, unaffordable insurance, lost jobs, a Medicare financial crisis, mushrooming federal budget deficits and fiscal crises across state governments.
    • Jun 22, 2017
  • Ethics upended

    Every week, Donald Trump finds another way to upend conventional ethics in government and politics. Here's one that has been in the making since the campaign but is reaching maturity in the Russian investigation: He is turning the heroes of government scandals into the villains.
    • Jun 15, 2017
  • More »

Readers also liked…

  • AEC dumps ALEC

    No matter which side of the battle over global warming you're on, that was blockbuster news last week. No, not the signing of the climate-change treaty that commits all of Earth's 195 nations to lowering their greenhouse-gas emissions and slowing the heating of the planet, but American Electric Power's announcement that it would no longer underwrite efforts to block renewable energy or federal smokestack controls in the United States.
    • Dec 17, 2015
  • No tax help for Trump

    The big conundrum is supposed to be why Donald Trump does so well among white working-class people, particularly men, who do not have a college education.
    • Aug 11, 2016
  • Dollars and degrees

    Governor Hutchinson says a high graduation rate (ours is about the lowest) and a larger quotient of college graduates in the population are critical to economic development. Every few months there is another, but old, key to unlocking growth.
    • Aug 25, 2016

Most Shared

  • So much for a school settlement in Pulaski County

    The Arkansas Democrat-Gazette's Cynthia Howell got the scoop on what appears to be coming upheaval in the Pulaski County School District along with the likely end of any chance of a speedy resolution of school desegregation issues in Pulaski County.
  • Riverfest calls it quits

    The board of directors of Riverfest, Arkansas's largest and longest running music festival, announced today that the festival will no longer be held. Riverfest celebrated itsĀ 40th anniversary in June. A press release blamed competition from other festivals and the rising cost of performers fees for the decision.
  • Football for UA Little Rock

    Andrew Rogerson, the new chancellor at UA Little Rock, has decided to study the cost of starting a major college football team on campus (plus a marching band). Technically, it would be a revival of football, dropped more than 60 years ago when the school was a junior college.
  • Turn to baseball

    When the world threatens to get you down, there is always baseball — an absorbing refuge, an alternate reality entirely unto itself.

Latest in Ernest Dumas

  • The ACA can be fixed

    Majority Leader Mitch McConnell threatened his 51 disciples in the Senate and his party with the gravest injury imaginable.
    • Jul 13, 2017
  • Trusting

    It is a Fourth of July ritual to appraise where we are in meeting the Declaration of Independence's promise to institute a government that would, unlike King George, secure human rights equally for everyone who sets foot on American soil.
    • Jul 6, 2017
  • Obamascare

    Republicans at long last may be about to see their most fervent wishes and wildest predictions materialize — millions of people losing their medical and hospital coverage, unaffordable insurance, lost jobs, a Medicare financial crisis, mushrooming federal budget deficits and fiscal crises across state governments.
    • Jun 22, 2017
  • More »

Event Calendar

« »

July

S M T W T F S
  1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31  

Most Viewed

  • Another Jesus

    If you follow the logic of Jason Rapert and his supporters, God is very pleased so many have donated money to rebuild a giant stone slab with some rules on it. A few minutes on Rapert's Facebook page (if he hasn't blocked you yet) also shows his supporters believe that Jesus wants us to lock up more people in prison, close our borders to those in need and let poor Americans fend for themselves for food and health care.
  • Pay attention

    If anyone thinks that a crisis with the Power Ultra Lounge shooting, then he hasn't been paying attention to Little Rock.

Most Recent Comments

  • Re: Another Jesus

    • The first commandment directly contradicts the first amendment.

    • on July 21, 2017
  • Re: Another Jesus

    • Arkyguy, try Numbers 31:17-18.

      Bishop?

    • on July 21, 2017
  • Re: Another Jesus

    • And I quote: "Sounds like maybe some of those descriptors hit a little close to…

    • on July 21, 2017
 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation