Tax cuts, healthcare and job growth

There’s been plenty of good news about the Arkansas economy lately. More Arkansans are trying to work and more are finding work when they look, according to recently released numbers.

Moody’s Investor Services says our state saw the second highest increase in workforce participation, beating 48 others. That means people are getting off the couch, so to speak. Beyond that, our unemployment rate decreased from 5.6% to 5.4%. So people are finding places to go when they get off the couch, which is the whole reason to get off of the couch in the first place.

As a result, state tax collections continue to rise, beating last year’s total and the forecasted amount by the Department of Finance and Administration.

What deserves credit for all of these positive indicators? Definitive conclusions are difficult to reach, and it takes time to see a trend. But at a minimum, this data might be useful to disprove the incorrect conclusions of others who rushed to predict the effect of two key policies enacted by the Arkansas Legislature.

In 2013 and 2015, legislators boldly chose to cut the income tax. Both cuts were similar in size, totaling around $150 million each, an amount equal to roughly 3% of the state budget. They were the largest income tax cuts in the history of the state, and intended to be only the beginning of a serious discussion about much needed reform.

Some advocates and liberals opposed both measures for a variety of reasons. Mostly, they said it was too costly and would drain the state of adequate resources. In other words, a budget crisis was predicted. The opposite has happened. State collections continue to grow and exceed expectations.

Arkansas is now on the path of competitiveness with our neighboring states. Our top marginal income tax rate is finally below 7%. The middle class brackets have been expanded and reduced. Tax cuts don’t have to mean fiscal crisis, if done responsibly. Reforming the tax code and reducing the tax burden should continue to be a priority for legislators. Cries of budget shortfalls should continue to be ignored.

It’s a good thing when people choose to work. It’s even better when they can find work. Both are happening in Arkansas. But the workforce participation number seems significant, particularly when put in the context of healthcare.

A frequent criticism of the “Private Option” – Arkansas’ premium assistance program for low-income earners – is that it discourages work. Some have said people would choose not to work, staying in poverty because of access to highly subsidized insurance. It was even predicted that citizens of neighboring and non-expansion states would move to Arkansas to enroll in the program, driving up our unemployment numbers and turning us into a “Medicaid-mecca.”

Those always seemed like odd arguments to make. Sure, there are those who are content with the very least they need to survive. But those types of people were already entitled to free healthcare, as pre-expansion Arkansas offered Medicaid to people with children and no income. A person lost coverage by being employed. The cliff was steep. Eliminating it makes it easier for those trying to climb the economic and workforce ladder.

The Moody’s numbers show that Arkansas’ workforce isn’t shrinking, or getting lazier. The number of people looking for work is growing, and they’re finding it when they look.

There’s no way to know how large of a role the “Private Option” has played in this development. There are many factors, without a doubt. Of the other states ranking highest in workforce growth, some expanded coverage and some did not. We ranked 2nd best. Maybe offering insurance to people did make them lazy, and we would have ranked 1st in growth if we had not, but I doubt that.

Maybe healthcare coverage is just irrelevant. Regardless, the only thing that seems conclusively clear is that those who predicted tragic workforce implications because of expansion were wrong. Arkansans are still working, and in greater numbers than years past.

Leaping to conclusions before knowing the facts is a dangerous thing to do. Thankfully, these recent numbers on the state budget, unemployment, and workforce participation give our leaders a glimpse into how our state is performing and should offer some guidance about what to do next.

On healthcare and tax cuts, it’s safe to say what we have done in the past isn’t holding back the economy of today. It might even be helping. I won’t jump to that conclusion, though.

I’ll just hope the good news continues.