Taxes and Spending

Academic Research

“State Taxes and Manufacturing Productivity: A Case Study of Arkansas” by Jacob Bundrick

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From 2002 through 2012, compared with its surrounding states Arkansas saw less growth in the real dollar value of manufacturing, a greater decline in manufacturing’s share of gross domestic product, and a faster rate of job loss in manufacturing. One reason for these outcomes is manufacturing’s slow growth in labor productivity, which is defined as growth in the dollar value of output per manufacturing employee, adjusted for inflation. This study examines the relationship between state and local taxes and labor productivity in manufacturing. Bundrick finds that total state and local tax burdens reduce output per manufacturing employee, primarily through sales and corporate income taxes. Legislators across all states should consider the distortionary effects of taxes when making tax-policy decisions, because these decisions will influence not only manufacturing productivity, but also the rate of economic growth.

“The Determinants of the Severity of State Fiscal Crises” by David T. Mitchell and Dr. Dean Stansel

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During the most recent recession, many state governments faced substantial budget shortfalls. These shortfalls are often blamed on external factors such as the declining economy or reductions in federal aid. Less attention is given to what politicians themselves do, especially during expansionary years—whether they enact spending increases, implement tax cuts, increase the size of their rainy day funds, or follow some combination of these strategies. We examine these factors and find that fiscal stress tends to be positively associated with spending growth, negatively associated with the size of rainy day funds, and not statistically significantly associated with the unemployment rate or with federal aid.

ACRE Working Papers

“Arkansas: The Road Map to Tax Reform” by Jeremy Horpedahl and Nicole Kaeding

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The last comprehensive tax reform in Arkansas took place in 1971. The previous tax reform took place in 1929. With the creation of the Arkansas Tax Task Force, Arkansas is ready to challenge the status quo and pass tax reform. Before the creation of this task force, the Arkansas Center for Research in Economics partnered with the Tax Foundation to publish this study. Co-written several scholars including Dr. Jeremy Horpedahl, an ACRE scholar and associate professor at the University of Central Arkansas, this report analyzes the state of taxation in Arkansas. It seeks to catalog Arkansas’s strengths, discuss the challenges Arkansas faces, and explore possible solutions. It makes several suggestions to improve the tax code in areas such as the individual income tax, the corporate income tax, the sales tax, and property tax.

“Learning from Other States’ Successes and Failures in Tax Reform” by Jeremy Horpedahl and  Nicole Kaeding

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After “Arkansas: The Road Map to Tax Reform” was published, many Arkansans questioned whether the reforms described are even possible? Have any other states tried these reforms? The answer to that question resulted in this research paper, which goes into detail about the many reforms other states and jurisdictions have enacted that are very similar to what was written about in “Arkansas: The Road Map to Tax Reform” and to what is being debated in Arkansas. These other jurisdictions include Utah, North Carolina, Indiana, the District of Columbia, and Kansas. The details and stories from this research paper describing what other states have experienced when passing tax reform furnish several important lessons that can help Arkansans understand the possible results of tax reform.

“There’s Nothing Natural about the State of Government Spending in Arkansas” by Jeremy Horpedahl and Jacob Bundrick

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Click to view a one-page infographic based on this research.

Despite being one of the poorest states in the nation, Arkansas has high state government spending, even compared to similar states. Arkansas has higher state spending per capita than its bordering states and than other regional “competitor states,” specifically Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia. When federal transfers are subtracted from state government spending, Arkansas still has far higher spending than its competitor states. In this study, Dr. Jeremy Horpedahl and Jacob Bundrick undertake a comprehensive analysis of how Arkansas got where it is today and of the reforms necessary to put Arkansas on a more sustainable path. Arkansas’s spending trends are very similar to those of other states, but the magnitude of Arkansas’s spending and the institutional environment that has shaped it are unique. Given Arkansas’s history of state spending growth, it would be wise to consider some limits to future increases in spending.

Radio and TV

  • “Governor’s Tax Cut Plan”: UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl was on Capitol View on February 4, 2019. He discussed the Arkansas governor’s tax cut plan and what it means for the state, as well as other potential tax changes for Arkansas during the 2019 session.
  • “Pros and Cons of Issue 5 Minimum Wage Hike”: UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl discussed Issue 5 in a segment on THV on October 30, 2018.
  • UCA Assistant Professor of Economics and ACRE Scholar Dr. Jeremy Horpedahl discussed the consequences of raising the minimum wage in Arkansas on AETN’s Arkansas Week on October 19, 2018.
  • “Arkansas Tax Task Force Refines Recommendations for 2019 Legislation”: ACRE Scholar Jeremy Horpedahl was interviewed by KARK Local News on August 7, 2018, after an Arkansas Tax Task Force meeting in which the task force refined its recommendations to the legislature.
  • ACRE Scholar Dr. Jeremy Horpedahl was a guest on the Dave Elswick Show on 101.1 FM. He discussed tax reform on May 29, 2018.
  • On February 18th, 2018, ACRE Scholar Dr. Jeremy Horpedahl was interviewed on Capitol Hill by Jessi Turnure, KARK political correspondent, about the book Horpedahl co-authored with the Tax Foundation concerning the state’s tax code as well as about the upcoming fiscal session.
  • On December 22, 2017, ACRE Scholar Thomas Snyder and Policy Analyst Jacob Bundrick were guests on Newsradio 102.9 KARN. They talked with Dan Harpool about occupational licensing (including the new Institute for Justice report), about Bundrick’s study of the Quick Action Closing Fund, and about all the latest tax reform news (both in Arkansas and in the US).
  • On October 27, 2017, ACRE Scholar Jeremy Horpedahl was a guest speaker on NPR’s Marketplace where he discussed SALT deductions. Twelve million people tuned in to this segment.
  • ACRE Policy Analyst Jacob Bundrick was a guest on the Paul Harrell Show on September 27, 2017 where he talked about his new paper on Arkansas state taxes and manufacturing productivity.
  • ACRE Scholar Jeremy Horpedahl and Policy Analyst Jacob Bundrick were guests on the Paul Harrell Program on August 16, 2017. They discussed their new paper published by the Mercatus Center, “There’s Nothing Natural about the State of Government Spending in Arkansas.”
  • ACRE Scholar Jeremy Horpedahl and Policy Analyst Jacob Bundrick spoke in an hour-long segment on the 96.5 FM Dave Elswick Show on August 10, 2017. They discussed state spending and their new paper published by the Mercatus Center, “There’s Nothing Natural about the State of Government Spending in Arkansas.”
  • ACRE Director David Mitchell and Policy Analyst Jacob Bundrick spoke in a two-hour segment on the 96.5 FM Dave Elswick Show discussing Arkansas taxation, subsidies, and other state issues on July 13, 2017.
  • Policy Analyst Jacob Bundrick was a guest on Josh Waters 101.3 FM on July 6, 2017, to discuss policy issues in Arkansas.
  • ACRE Director David Mitchell, Scholar Jeremy Horpedahl, and Policy Analyst Jacob Bundrick were guests on Newsradio 102.9 KARN on May 1, 2017, where they discussed Arkansas tax reform and other state issues.
  • ACRE Director David Mitchell and Scholar Dr. Jeremy Horpedahl were guests on the Paul Harrell Program on January 4, 2017. They discussed the complexity of Arkansas’s tax system and possibilities for tax reform.
  • ACRE Policy Analyst Jacob Bundrick and ACRE Scholar Dr. Jeremy Horpedahl were on Newsradio 102.9 KARN on December 28, 2016, discussing tax reform in Arkansas.

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