The Truth In Arkansas Politics

Former President Bill Clinton’s visit to Little Rock to raise campaign funds for Democrat nominee for governor Mike Beebe today should remind voters of the two men’s long record of raising taxes on working Arkansans without delivering results, said Clint Reed, executive director of the Republican Party of Arkansas in a statement today.



“In 1983, Governor Bill Clinton pushed for a sales tax increase, calling it an ‘investment in the future of our children and in the economic development of our state.’ Now, almost a quarter century later, Arkansas is still near the bottom of national rankings in income growth.



“Mike Beebe supported Gov. Clinton’s tax increase as one of his first tax hikes in a legislative career that totaled $10 billion in new taxes on Arkansans. Now that he is running for Governor, General Beebe says that we need to cut taxes. Why is he running away from his record?



“We are happy to welcome Mr. Clinton home to Arkansas but hope that Arkansans will remember that he and General Beebe are responsible for billions of dollars in taxes paid by Arkansans over the last 20 years, without having delivered on the promised improvements in incomes. Can Arkansas afford another Democrat governor who over-promises and under-delivers?”



Source material from Arkansas Policy Foundation (www.reformarkansas.org)



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Background:


"IT'S LIKE DÉJÀ VU ALL OVER AGAIN"
(WHERE IS THE INCOME GROWTH IN ARKANSAS?)

(Gov.) Clinton said his proposed higher sales tax "is not just a tax increase that's a tax increase. It's an investment in the future of our children and in the economic development of our state."
'Clinton Asks 1 Cent Sales Tax Rise,' Arkansas Gazette, Sept. 20, 1983

'Arkansas Ranks 49th In Income,' Arkansas Gazette, Sept. 6, 1983
Arkansas Ranks 49th In Per Capita Income In The U.S., BEA, 2002 data

Little Rock (Oct. 31, 2003) Two decades ago Arkansas Gov. Bill Clinton promoted a 33 percent sales tax hike to fund public education, linking it to economic development and income growth. Today, tax increase supporters are again claiming higher taxes and more spending on public education will lead to economic development and its corollary: income growth (Arkansas ranked 49th in the U.S. in 1983 and 2002). Surveying this policy landscape one is reminded of the immortal words of New York Yankees Hall of Fame catcher Yogi Berra: "It's like déjà vu all over again."

There are many similarities between what occurred in 1983 and recent events. The 1983 tax increase—the largest in Arkansas history—was Gov. Clinton's response to a state Supreme Court decision upholding a lower court ruling that found the state formula for distributing aid within the K-12 system unconstitutional (Alma v Dupree). The proposed 2003 tax increase—potentially the largest in Arkansas history—is the response of Gov. Mike Huckabee and some Democratic lawmakers' to another Supreme Court decision upholding a lower court ruling that found the K-12 system "inadequate" and "inequitable." (Lake View v Huckabee) The Court set a Jan. 1, 2004 deadline for the state to address these problems.

Gov. Mr. Clinton proposed a sales tax hike from three to four cents that was approved by the legislature and signed into law. Mr. Huckabee has proposed a sales tax increase from 5.125 to 6.125 cents. Some Democratic lawmakers are proposing hikes in sales and income taxes. One of the proposals is likely to be considered by the legislature if the governor schedules a special session in December to address Lake View.

The most striking, if unchallenged, claim made in 1983 and by some today is that increased spending on K-12 public education—not tax rates, infrastructure, access to markets, labor force competitiveness, natural resources or other factors—is the key to Arkansas' economic development and income growth. Gov. Clinton linked his tax increase for public education to the state's economy. By doing nothing, he said in an August 1983 speech, Arkansas would be ensuring that it would remain in the "economic backwater" of the country. Nothing is more closely tied to the state's chances for economic development, Gov. Clinton claimed, than a better-funded K-12 system.

Gov. Clinton tied Arkansas' economic future to "investing" in public education, warning Arkansans would no longer say. 'Thank God for Mississippi' if taxes were not raised and spent on the K-12 system. "To put it bluntly and get right to the point," Gov. Clinton declared, "we've got to raise taxes to make Arkansas competitive with the nation and the world economically." Some at the state Capitol are making similar claims today.

Proponents of this viewpoint will have a difficult time defending their position. Income growth is a corollary of economic growth. Arkansas ranked 49th in per capita income in 1983, according to the U.S. Bureau of Economic Analysis, and remained 49th in 2002. Nor has Arkansas' median family income rank, compiled by the U.S. Census Bureau, improved in the interim. Education is a factor of economic development but by no means the only one in Arkansas. After reviewing the lack of income growth since the 1983 tax increase some public officials may be thinking of another Yogi Berra-ism: "I didn't really say everything I said."

--Greg Kaza

'AEA Wants Legislature Recalled To Pass Sales Tax Increase,' Arkansas Gazette, April 12, 1983;
'State Supreme Court Rules State Aid Formula Unconstitutional,' Arkansas Gazette, June 1, 1983;
'Arkansas Will Fall Behind Mississippi, Gov. Clinton Warns,' Arkansas Gazette, Aug. 25, 1983;
'Clinton Offers Details Of His Plan,' Arkansas Gazette, Sept. 21, 1983;
'Clinton Offers More Details,' Arkansas Gazette, Oct. 14, 1983.

ARKANSAS STILL RANKS 49TH DESPITE TAX INCREASES LINKED TO INCOME GROWTH

(August 2005) Arkansas ranks 49th in per capita personal income according to 2004 preliminary data released by the U.S. Bureau of Economic Analysis (BEA). Arkansas has not improved its second-to-last place rank, ahead of only Mississippi, despite record tax increases linked by proponents to income and economic growth.

Arkansas per capita personal income for 2004 was $25,725, or 0.78 percent of the U.S. ($32,937). Mississippi, which ranks 50th, had a per capita personal income of $24,650, or 0.75 percent of the U.S. Both states were well below the Southeast region ($29,769).

Per capita personal income in Arkansas was 0.75 percent of the U.S. in 1983 when then-Gov. Bill Clinton linked a 33 percent sales tax increase to income and economic growth. (Arkansas Gazette: June 1, Aug. 25, Sept. 20-21, Oct.14, 1983 and Aug. 1, 1984). The tax increase did not improve Arkansas' long-term per capita rank.

By contrast, Mississippi per capita personal income has grown at a rate greater than Arkansas'. Per capita personal income in Mississippi was 0.68 percent of the U.S. (1983) and 0.75 percent (2004).

BEA calculates per capita personal income by dividing the personal income of the residents of a given area by the resident population using Census Bureau annual midyear population estimates. Following are state rankings based on the 2004 preliminary data.

State Rankings, Per Capita Personal Income (2004)

Connecticut $45,398
Massachusetts $41,801
New Jersey $41,332
Maryland $39,247
New York $38,228
New Hampshire $37,040
Colorado $36,063
Delaware $35,861
Minnesota $35,861
Virginia $35,477
Washington $35,299
California $35,019
Alaska $34,454
Illinois $34,351
Wyoming $34,306
Rhode Island $33,733
Nevada $33,405
Pennsylvania $33,348
United States $32,937
Vermont $32,770
Hawaii $32,160
Wisconsin $32,157
Michigan $31,954
Florida $31,455
North Dakota $31,398
Nebraska $31,339
Ohio $31,322
South Dakota $30,856
Kansas $30,811
Missouri $30,608
Maine $30,566
Iowa $30,560
Texas $30,222
Indiana $30,094
Georgia $30,051
Tennessee $30,005
Oregon $29,971
North Carolina $29,246
Arizona $28,442
Oklahoma $28,089
Alabama $27,795
Kentucky $27,709
Louisiana $27,581
South Carolina $27,172
Idaho $27,098
Montana $26,857
Utah $26,606
New Mexico $26,191
West Virginia $25,872
Arkansas $25,725
Mississippi $24,650

(Source: BEA)