People may be suckers for agreeable fantasies, but when it comes to their government they prefer to believe the worst. That impulse explains the big media campaign by Americans for Prosperity to persuade voters that government leaders in Arkansas are taking their fine old state down to ruin.
Democrats, see, have generally been in charge in Arkansas and the TV commercials are supposed to give a big lift to Republicans running for legislative seats and also those running for Congress, as if they needed it.
The ads by Americans for Prosperity, a political nonprofit run largely by two of the three multibillionaire Koch brothers, says Arkansas state and local governments have driven up taxes and debt so high the past few years that people and jobs are fleeing the state.
All of it is laughably and provably false, but people in every state, including Arkansas, tend to believe their taxes are higher than those in other places. Arkansans have believed that, even during all the decades when the state ranked dead last in state and local taxes per capita and out of sight of the 49th state.
Governor Beebe took umbrage at the commercials last week although it didn’t mention him or the Democratic Party. As long as the ads don’t say straight out whom to vote for or against, Americans for Prosperity does not have to say where the ad money comes from. It’s educational, not political, so the U.S. Supreme Court says that’s OK.
Beebe took the clever tack that the ads were trashing Arkansas, sort of like when Gov. Mike Huckabee went on a New York radio show and called his home state a “banana republic.”
The ads did seem to fly in the face of recent history. Arkansas’s unemployment and growth rates have been better than the nation and most nearby states. It is one of three states that have run surpluses rather than cutting services or raising taxes, although it did so thanks to President Obama’s 2009 stimulus program, which saved the state $725 million in Medicaid expenses over three years. Beebe pointed out that since he became governor in 2007 state taxes have been slashed a net of $730 million, mostly by lowering the sales tax on groceries from 6 to 2 percent.
The AFP ads are nothing new. Lobby groups and people not in power raise the same issue decade after decade, often using the same suspect sources. The same dynamic occurs in nearly every state — taxes are always higher than other places, and the state will prosper if you lower mine. Still, it needs to be countered every time.
But first, let’s acknowledge a small truth in the AFP ads. State taxes and debt did rise significantly from 1999 through 2006. But the governor who pushed all those taxes and new debt was Mike Huckabee, a Republican. He raised more taxes — three sales tax increases, a temporary personal and corporate income tax increase, motor fuel taxes, tobacco taxes, liquor taxes, a giant tax on nursing home residents, and others — and increased the state debt more than any governor in Arkansas history. He coerced Democratic and Republican legislators and, at one point, the voters in going along with the taxes and borrowing.
The AFP ads, using figures from the business-oriented Tax Foundation, say Arkansas this year has the 14th highest per-capita tax burden in the country and a worse-than-average business tax climate.
The Tax Foundation doesn’t rely on the actual taxes collected by each state; that’s too simple. It constructs a theory about taxes and formulas to implement it so that states with income taxes tend to look worst.
If you add all the taxes actually collected by the state and local governments and divide the total by the population — you can do the numbers at home — Arkansas comes out not 14th but 47th among the states. All the surrounding states are higher. Now, the states distribute the tax burden in different ways, and Arkansas does it most unfairly, putting it most heavily on working folks with modest incomes with sales and excise taxes. But real numbers are the only way to measure each state’s tax policy.
The Tax Foundation abuses poor states like Arkansas unmercifully. It says Arkansas levies a 3-percent surtax on corporation income, a brief tax that the Democratic Arkansas legislature repealed in 2005. It assigns to Arkansas taxpayers a share of the mineral severance taxes collected in other states like Alaska, Texas, Oklahoma and Wyoming. See, since Alaska’s 22.5 percent production tax on oil and gas (thanks, Gov. Sarah Palin!) is paid by the producers and not by local people, the Tax Foundation assigns those taxes to people in other states, like Arkansas, that consume the petrochemical products. Florida levies a high sales tax but the Tax Foundation says tourists pay it so it doesn’t count as much of a per-capita tax for Floridians.
You will note that states without income taxes show up as low-tax states in Tax Foundation rankings although the actual numbers show them as high-tax states.
There is perversity in Americans for Prosperity using Tax Foundation formulas, which favor state governments like Alaska and Texas that get their money from high mineral taxes. The Kochs hate taxes on oil, gas and coal production, where they got their fortunes. They led the way in blocking Arkansas from levying a meaningful gas severance tax.
Workers are the packhorses of the state and local government tax systems, and the Kochs, their brethren and the politicians they elect are going to keep it that way.