Arkansas: Hutchinson's Tax Tall Tale


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There's a reason why state and local lawmakers are so eager to grant special tax breaks to corporations: footloose companies frequently claim that tax incentives can be the critical factor in determining where they open that new manufacturing plant. When you hear this enough, you start to believe it's true-- even when the firms in question are making it all up.

This may explain where Arkansas gubernatorial candidate Asa Hutchinson was coming from when he asserted recently that the reason Arkansas lost a new steel plant to Mississippi was because of the state's sales tax on energy. Addressing the state's chamber of commerce, Hutchinson said:
"Should Arkansas be one of the few states in this region that taxes electricity rates that go to job-producing industries ? That is one of the reasons cited why an $ 880 million steel mill went to Mississippi instead of Osceola. It would have produced 450 jobs."
Compelling stuff-- except it's just not true. The president of the steel company in question, Steelcor, told the Arkansas Democrat Gazette that he didn't even know for sure whether Steelcor would have qualified for a special sales tax break--but that either way, the sales tax question was "not one of the reasons" why Steelcor ended up choosing Mississippi over Arkansas.

Of course, this is an unusual burst of candor for a firm in this situation. For every case where we know the tax situation didn't matter, there's another location decision where state lawmakers can only speculate-- or where the firms in question choose not to be so honest.

The special tax break that Steelcor may or may not have been eligible for was created in the 1980s to encourage Nucor to build in Arkansas-- and they did. But lawmakers will never really know if the tax break swung Nucor's decision back then. And the only folks who really know the answer (the good people of Nucor) have no reason to tell the truth about this.

Hutchinson's factually incorrect assertion, and the obvious inattention of Steelcor execs to the question of whether this tax break was even available, exemplify the confusion and guesswork that goes into the raft of tax incentives continually thrown at the feet of multi-state corporations by state and local governments. Whatever you think of the legal theory behind the Cuno case, good-government advocates have to be rooting for an end to the cross-state competition for footloose firms-- and and the US Supreme Court's impending Cuno decision may yet get us there.
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