“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 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.