Arkansas: Movin? on up the ALEC Rankings (Editorial)

In the American Legislative Exchange Council’s first economic ranking of all 50 states, Arkansas, with its low property and business taxes, no estate tax, low workers’ compensation costs and “right-to-work” laws, ranked 15th out of the 50 states.

The state has garnered numerous favorable rankings lately and the economic ranking is but another sign that we’re doing some things right – well, at least better than some other states.

The sad news from the report, “Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index,” is that the authors, Arthur Laffer, nationally recognized economist, and Stephen Moore of The Wall Street Journal, said Arkansas could have scored much higher but for its relatively high personal income tax (where it ranked 33rd) and sales taxes (ranked 46th) and poor state liability system (ranked 41st).

“States are in direct competition with each other for human capital and business investment,” said state Sen. Steve Faris, 2008 national chairman of ALEC. “State governments that think they can attract jobs and people, and grow their economies, by taxing their citizens at a higher rate than their neighbors are sadly mistaken,” he said.

The authors looked at 16 policy variables that impact the migration of human and investment capital in and out of states.

According to their findings, 8 million Americans moved from one state to another last year, revealing which states have the most dynamic and desirable economies.

The winners were generally the states with the lowest tax, spending and regulatory burdens. The biggest losers were California, the Northeast and the Midwest.

“No state has ever taxed its way into prosperity,” said Jonathan P. Williams, director of ALEC’s Tax and Fiscal Policy Task Force.

Admittedly, the ALEC is very conservative and seeks to advance free markets and limited government.

And states like Arkansas that have a larger percentage of poor residents needing government services do face a vicious cycle. Still, the point is very well taken.

Williams said it “was clear that states that keep spending and taxes low exhibit the best economic results, while states that follow the tax-and-spend path lag far behind.” 

By the way, the top-ranked state was fast-growing Utah, followed by Arizona, South Dakota, Wyoming and Tennessee.