Arkansas ranks 35th in the United States in economic freedom, according to an annual report released yesterday by the Fraser Institute. Arkansas’s score held steady from the previous report, though the ranking dropped slightly as other states improved their scores.
The report was authored by Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute; Dean Stansel, Research Associate Professor at Southern Methodist University; and José Torra, the head of research at the Mexico City-based Caminos de la Libertad.
The 2017 Economic Freedom of North America study measures the economic freedom in U.S. States, Mexican States and Canadian provinces on the basis of three main criteria: taxes, government spending and labor market freedom. The report measures policies related to these areas that were in place in 2015.
According to the Fraser Institute, the average per capita income in the most-free states in 2015 was seven percent above the national average, compared to roughly five percent below the national average in the least-free states.
Stansel said in a news release announcing the study’s findings:
“The link between economic freedom and prosperity is clear—people who live in states that support comparatively low taxation, limited government and flexible labor markets have higher living standards and greater economic opportunity.”
Of these three areas, Arkansas fared particularly poorly in taxation with a ranking of 43. The study’s authors based a state’s tax ranking on income and payroll tax revenue as a percentage of personal income, top income tax rate, top income tax threshold, property tax and other tax revenue as a percentage of personal income, and sales tax revenue as a percentage of personal income.
Arkansas Center for Research In Economics (ACRE) Director and UCA Associate Professor of Economics Dr. David Mitchell said of the study’s findings:
“Arkansas has many areas of economic freedom that need improvement, but I am excited about the possibility of greatly improving our tax system through the Task Reform and Relief Task Force. I look forward to Arkansas improving its economic freedom ranking in future editions of this report which uses the best available academic research on what makes states prosperous.”
The Arkansas Tax Reform and Relief Legislative Task Force is currently considering possible changes to make Arkansas’s tax code simpler, fairer and more competitive with the rest of the nation. For more information on what they’re discussing, you can read ACRE’s coverage of what happened at their meetings on sales and excise taxes, property taxes, and a discussion with legislators from other states.
For a detailed account of Arkansas’s tax system, its history, and suggestions for tax reform, read “Arkansas: The Road Map To Tax Reform” co-authored by experts at the Tax Foundation and ACRE Scholar and UCA Associate Professor of Economics Dr. Jeremy Horpedahl.