(Nov 18, 2003) Arkansas still ranks 49th in per capita personal income two decades after officials linked a sales tax increase for K-12 public education to economic and income growth. Between 1983 and 2002, West Virginia (48th), Arkansas (49th) and Mississippi (50th) did not improve in rank while other states in the 12-state Southeast region jumped in rank.

Per capita personal income rank is a state’s position versus all 50 states. U.S. per capita personal income was $30,832 in 2002. It was $27,683 in the Southeast, but only $23,417 in Arkansas and $22,370 in Mississippi.

Seven Southeast states improved their income rank in the period, according to Bureau of Economic Analysis data. They are South Carolina, which improved from 47th in per capita personal income rank (1983) to 40th (2002); Alabama, 43rd (2002) from 46th (1983); Kentucky, 39th (2002) from 45th (1983); Tennessee, 35th (2002) from 43rd (1983); North Carolina, 34th (2002) from 39th (1983); and Virginia, 11th (2002) from 15th (1983).

The most dramatic improvement in per capita personal income rank occurred in Georgia, which improved from 37th (1983) to 28th (2002).

Louisiana, 36th (1983) and 41st (2002); and Florida, 17 (1983) and 22nd (2002), declined in rank during the period.

Arkansas also ranked 49th, ahead of only Mississippi, in another BEA measure: per capita disposable personal income.

The BEA, a federal agency, defines per capita income as total personal income divided by total midyear population. Per capita disposable personal income is defined as total disposable personal income divided by total midyear population estimates of the U.S. Bureau of the Census.1

One Step Forward, Two Steps Back

Arkansas’ per capita personal income rank did improve slightly three times in the period. But Arkansas’ income rank later reverted to 49th.

Between 1984 and 1989 Arkansas was 48th ahead of West Virginia and Mississippi. In 1990 and 1991, Arkansas fell to 49th, ahead of only Mississippi. Arkansas improved to 46th in 19922 but fell to 48th in 1993 and remained there for five years (1993-98). In 1999 Arkansas was 47th ahead

of New Mexico, West Virginia and Mississippi in 1999 and 2000. Arkansas fell to 49th in 2001 and was 49th in 2002 ahead of only Mississippi.

Income Growth Factors Are Numerous

The federal data is a reminder the factors contributing to income growth are more numerous than certain Arkansas officials and interests contend.

In 1983, then-Gov. Bill Clinton linked a 33 percent sales tax increase from three to four cents to economic and income growth.3 The legislature passed the sales tax increase and Mr. Clinton signed it into law. Again, in mid-1984 Mr. Clinton linked the sales tax increase to income growth.4

There is an important difference between complying with a court order and enacting public policy to expand economic and income growth. The 1983 tax increase was Mr. 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).

Academic literature suggests the factors contributing to income growth are numerous. They include tax rates, infrastructure, workforce competitiveness and education, access to markets, natural resources, sound monetary policy contributing to low inflation, and transparent economic systems, including the rule of law, property rights and contract.

Officials and interests who contend increased K-12 spending leads to economic and income growth cannot explain Arkansas’ rank of 49th in per capita personal income two decades after the 1983 sales tax increase.

They can argue the state Supreme Court upheld a lower court ruling that found the K-12 system “inadequate” and “inequitable.” (Lake View v Huckabee) Or they can argue from a philosophical view that supports a greater role for government. But unless these officials and interests start to seriously take into account all factors affecting economic and income growth Arkansas could find itself in a race to the bottom.

--Greg Kaza

3 Arkansas Gazette: June 1, 1983; Aug. 25, 1983; Sept. 21, 1983; and Oct.14, 1983.
4 Arkansas Gazette, Aug. 1, 1984.