RAZORBACK PRODUCTION ZONES
"The State of Arkansas must understand this fact and take the necessary steps to minimize the state tax burden on companies interested in locating or expanding their operations in the state." (1)
Enterprise zones are no substitute for a fiscal structure that features low overall tax rates on investment. The Policy Foundation's proposal for Razorback Production Zones is no panacea. Rather, it is a tentative response to the post-1995 decline in Arkansas Manufacturing, documented in federal data (Gross State Product, employment, income).
Tax-Free Production Zones
A premise of enterprise zones is that entrepreneurs respond to economic incentives, including tax rates and regulation. President Ronald Reagan (1981-89) and Jack Kemp, head of the U.S. Department of Housing and Urban Development under President George H. Bush (1989-1993) proposed them as a tool to foster economic development in depressed urban areas. More recently, states with large industrial bases have debated the idea to retain and expand Manufacturing production, especially Durable Goods.
All taxes would be waived in a Razorback Production Zone for a multi-year period except property taxes for K-12 public education, and, if applicable, emergency services. These would include sales, use and income taxes identified by Flour GLS in their 2002 study, which found many Arkansas' rates were higher than those imposed by other states in the region. (Example: Arkansas' state sales tax on industrial material used and consumed in the manufacturing process is among the highest in the Southeast). They would also include individual income taxes on employees, other property taxes, and all other taxes, including municipal and county levies.
Razorback Production Zones would be limited to Arkansas three sites where Manufacturing superprojects employ at least 3,000.
(1) "The Flour
GLS Study And Arkansas' Hunt For A Manufacturing Superproject," Arkansas
Policy Foundation research memo, 2002.