From reading groups and guest speakers, to professional development for educators and media mentions by the White House, ACRE has had another successful semester of economics, education, and policy research. We hope you’ve been able to come to one of our events on campus, or read some of our many materials online.

Distinguished Speaker Series & Colloquium

Michael Munger (right) with Jeremy Horpedahl

Our final guest speaker for the Fall 2023 semester was Michael Munger from Duke University, who gave a public talk on “Monopoly Power, Political Power, and the Problem of Platforms,” and also joined BT����students in several classes. Munger followed two other speakers this semester: Emily Hamilton from the Mercatus Center, who spoke about housing policy and affordability; and David Bernstein from George Mason University Law School, who spoke about the history of racial classification in the United States. Professor Bernstein was also the keynote speaker for and a participant in our annual ACRE Colloquium, which brought students and professors from across Arkansas together for a weekend to discuss the ideas in Bernstein’s book.

Fall Reading Groups

Students in Dr. Jacob Held’s “Landmark Supreme Court” reading group

Our reading groups set an ACRE record this semester! More students applied than ever before, resulting in a wait-list to participate. One of those groups visited Southern Methodist University in October for a weekend discussion event with students at other universities, and keynote speaker Dr. Bart Wilson from Chapman University. Our Spring 2024 reading groups will be announced soon, and we look forward to having another good response from BT����students.

K-12 Programs

ACRE’s K12 program has hosted a number of professional development opportunities for educators across Arkansas. This past month’s engaging topics included: “Economic Mysteries in Economic History: What was Roaring about the Twenties?” and “The 2023 Economics Nobel Prize: Claudia Goldin, Women, & Work.”  Looking ahead, the ACRE educator reading group will continue this spring. For a full list of K12 offerings, to sign up for the K12 newsletter, or request a classroom visit this spring, go to

Government Transparency in Arkansas

AFOIA in the State Constitution:

Lately in Arkansas there has been a lot of discussion about government transparency, both during the Special Session of the Arkansas General Assembly in September and in the aftermath of the legislative session, from which a citizen initiative emerged proposing the incorporation of Arkansas’s Freedom of Information Act (AFOIA) into the state constitution. ACRE Policy Analyst Dr. Joyce Ajayi has continued tracking these developments and offering her expertise to help support the public debate on the issue. In November, she participated as a panelist at a town hall meeting on this topic in Conway and also authored an op-ed, “,” published in the Arkansas Democrat Gazette. In the piece, she elaborates on the consequences and implications of incorporating AFOIA into the state constitution, emphasizing the need for careful consideration of both advantages and drawbacks.

Looking ahead, Joyce, along with a team of researchers across Arkansas, is co-authoring the Arkansas Civic Health Index. This publication will offer a comprehensive analysis of Arkansas’s civic health, including aspects like web transparency. The report, set to be released in December, will provide insights into the civic and political engagement landscape in Arkansas, showcasing strengths, weaknesses, challenges, and opportunities.

Media

As part of my role as Director at ACRE and a BT����professor, I regularly appear in the media and write popular essays about economics. A few of those outreach activities stood out as especially interesting and important this semester.

• I once again appeared on PBS’s Arkansas Week program and how that relates to public policy, such as the state budget.
• The Charles Koch Foundation featured an essay I wrote explaining . That essay summarizes a lot of the principles we use to think about fiscal policy at ACRE in our research and educational outreach.
• Lastly, a somewhat light-hearted blog post that I wrote about the cost of a , surprised me by getting picked up by a lot of media sources, as well as the a claim the White House made. I was not expecting that, but I am glad that someone is reading my work!

New Employees

ACRE is set to accomplish even more in the coming year with the addition of two outstanding individuals to our team. Elise Ormonde and Heidi Saliba each bring unique skillsets and perspectives to ACRE’s research and outreach. We are fortunate to welcome them, and you can read more about both here.

All of us at ACRE hope that you have a wonderful last few weeks of 2023, and we look forward to sharing more about all of our events, research, and student programs in 2024.

By Caleb Taylor

Arkansas’s lower income workers face some of the in the country. That hurts job seekers, entrepreneurs, and consumers. These regulations also . But new legislation could lead to better rules and more opportunities for Arkansans.  

, or the Red Tape Reduction Sunrise and Sunset Act, would require the Arkansas Legislative Council (ALC) to review each occupational authorization and each occupational entity on an annual rotating basis to determine if the existing occupational authorization or occupational entity, or both, is consistent with the “least restrictive form of occupational authorization to protect consumers from significant and substantiated harms to public health and safety.”

During testimony on the legislation in the Senate Committee on March 20, State Rep. Richard Womack, a co-sponsor of the legislation, said:

“This sets up a process through which a group from the Arkansas Legislative Council looks at all licensed entities once every 6 years on a rotating basis or upon request by a legislator. They do not have the authority to mandate any changes. They can make recommendations to the Legislature. The changes may or may not be made.”

ACRE Policy Analyst Alex Kanode also testified on the legislation in the Senate committee. He explained that Arkansas has high licensing burdens that “increase prices, [have] no impact on quality, and [have] a disparate impact on ethnic minorities and military spouses.”

Kanode said:

“Fortunately, sunset reviews are effective in reducing licensure burden across the U.S. Sunset reviews are regular examinations of different licensing entities, in this case every 6 years, in order to guarantee maximum effectiveness of public protection at the lowest burden to the public. Currently 26 states conduct sunset reviews, with two states already implementing them this year: Idaho and Ohio.

Sunset reviews are a chance for the Arkansas government to suggest and make changes at the local board level. What is good policy for the board of counselors may not be good for the board of cosmetology, and having this localized review of boards will help with that.

Sunset review could lead to the elimination of unnecessary regulations, but it can also lead to improvements of processes. Both of these lead to less waste of Arkansans time and money.”

You can check out Kanode’s full testimony .

For more on the benefits of sunset reviews in improving opportunity for Arkansans, see Kanode’s latest op-ed in the Arkansas Democrat-Gazette, “.”

You can find more of ACRE’s research on labor market regulation here including:  

•  co-authored by ACRE Scholar and BT����Associate Professor Dr. Thomas Snyder with researchers from the Mercatus Center with a related infographic that highlights the harms caused to ethnic minorities, military spouses and immigrants.
• “Unnatural Rights in the Natural State” a policy review was co-authored by ACRE Scholar and BT����Associate Professor Dr. Thomas Snyder with ACRE Director and BT����Associate Professor of Economics David Mitchell and Amy Fontinelle, an editor and author of several economics and policy related works. The authors discuss which occupations have the most burdensome licensing laws, how these restrictions affect job seekers, entrepreneurs, and consumers; and how we can reform the worst parts of these regulations.
• “Occupational Licensing Reform Across the United States” by ACRE-affiliated researcher Marc Kilmer looks at occupational licensing reform attempts across the nation including.

By Aaron Newell

How is the new minimum wage increase going to affect Arkansans? After passing with 68% of the vote in November, the minimum wage will rise to $11 an hour by 2021. Some say it will provide Arkansans with a living wage. Others say it will force businesses to lay off employees. But what does the evidence say?

ACRE scholars and researchers have written about the larger effects of the higher minimum wage previously. Concerns about minimum wages include: low-skilled workers suffer the most; employment falls; and the number of hours per worker falls. What is less-agreed upon is the size of these effects. Previous studies looked at minimum wage increases that fall between 37% and 59% of the median wage. The Arkansas minimum wage in 2021 of $11 would be about 74% of the median wage in Arkansas (depending on wage growth over the next few years).

A forthcoming paper, co-authored by BT����Associate Professor of Economics and ACRE Scholar Thomas Snyder, BT����Assistant Professor of Economics Weici Yuan, and BT����alumnus Senayt Rinkevich, looks at a specific question regarding minimum wage increases: Will Arkansas’s minimum wage increase create more welfare dependence?

The paper, “Do Minimum Wage Increases Affect SNAP Benefits?”, by the B.E. Journal of Economic Analysis & Policy, investigates the relationship between minimum wage increases and Supplemental Nutrition Assistance Program (SNAP) participants and benefits.

The paper suggests that high minimum wages, such as Arkansas’s, lead to more SNAP participants and expenditure.   A high minimum wages may create a barrier for job-seekers because it eliminates low-paying jobs. Employers may not be willing to hire as many employees if they are forced to pay higher wages.  This barrier may force some potential workers to depend on SNAP instead of their own income.

More specifically, the paper found that minimum wages above $8.58 became counter-productive, controlling for other factors such as the economy and the population within each state.  Specifically, they point out:

“Minimum wage increases are associated with fewer SNAP recipients until the real minimum wage surpasses $7.29 in 2009 dollars; further increases in the minimum wage are associated with more SNAP recipients. In current dollars as of September 2018, this turning point is at $8.58. Twenty states have minimum wages higher than $8.58.”

Arkansas’s minimum wage is now $9.25 per hour but will increase to $10 per hour in 2020 and $11 an hour in Jan. 1, 2021. $11 in Arkansas is 74% of the state’s median wage, which will be one of the highest minimum wages in the entire country. Arkansas may experience a reduction in SNAP participants because of a booming economy or improvements in areas of education and technology, but this study predicts that the large minimum wage increase will cause more people to depend on SNAP than it otherwise would have if it did not increase the minimum wage.  In conclusion, they argue that:

“Increasing the minimum wage can only decrease SNAP enrollment at very low minimum wages. At relatively high minimum wages, increases can cause more welfare dependence. Policymakers may have better tools to combat poverty than the minimum wage.”

For a copy of the working paper, please contact Dr. Snyder.
To see other blog posts we have written about the minimum wage in Arkansas, go here.
For more reading about labor market regulation in Arkansas, go here.
To see more of Dr. Snyder’s work with ACRE, go here.
To see Dr. Jeremy Horpedahl’s AETN interview on the minimum wage, .  

On February 13th, Rep. Justin Gonzales, R-Okolona, presented House Bill 1402 in front the House State Agencies Committee, which would limit special elections to just two dates a year – either at a primary or general election, or their corresponding dates in off years. Dr. Jeremy Horpedahl was invited to testify to the committee about his research on special elections. He explained how low voter turnout is during special elections (19%) compared to general elections (44%), and how the pass rate is much higher during special elections. He’s quoted in Jeannie Roberts’ article, “” in the Arkansas-Democrat Gazette about the committee meeting.

Arkansas has the in the nation at 9.43%. One reason for that is special elections. In 1981, the Arkansas legislature began allowing cities and counties to increase their sales tax rate and many did. 83% of the time, these increases are voted on during special elections. Special elections are usually single issue elections that happen outside of regular voting at a primary or general election. How important are special elections to the increases in taxes? In 2016, BT����assistant professor of economics and ACRE Scholar Dr. Jeremy Horpedahl and Alexandria Tatem, a BT����Schedler Honor’s College student and an ACRE student worker (who has now graduated), began gathering data on all sales tax elections in Arkansas since 1981, including ones at both special elections and normal elections.

What they found was interesting. Special elections to increase the sales tax have much lower turnouts and much higher pass rates than votes held at a primary or general election. Specifically, they found that voter turnout was 44% in general elections, 26% in primary elections, and 19% in special elections. The pass rate for these increases in the sales tax rate was 45% in general elections, 56% in primary elections, and 77% in special elections. It’s easy to see why Arkansas’s sales tax rate is so high, since 82% of all sales tax votes they collected occurred in a special election. Dr. Horpedahl also conducted statistical analysis with the data and found that turnout has an independent effect on the outcome. That means that even within special elections, higher turnout increases the share of “no” votes.

Dr. Horpedahl and I have updated the data to include elections through 2018. We collected data on 30 more elections, and the results still hold. The percent of special elections in the entire dataset increased to 83%, voter turnout stayed the same for general elections and special elections and decreased by 2% for primary elections, dropping to 24%. The pass rate for each election shifted slightly, moving general elections to a pass rate of 46%, primary elections to a pass rate of 61%, and special elections down to a pass rate of 76%. Please download our one page summary of the data to see more.

We have also mapped where the highest sales taxes are in the state. Below you’ll see a weighted average sales tax (which includes both county and city sales tax) for each county using county and city populations.

We have also updated the total estimated cost for hosting each election, based on data we obtained directly from local government statements for a sample of elections. Previously, the costs of all the special elections was $7.4 million, but after adding the new elections and updating the numbers for inflation, the total cost to taxpayers is $9.8 million for holding these elections. This is not just the cost of doing business or the cost of democracy – this is money that could be completely saved if the elections were to be held at the same time as primary or general elections.

The cost of allowing these special elections is high. It is part of the reason that Arkansas has the third highest sales tax burden in the country. 83% of sales tax increase ballot issues have been held at a special election, and since these elections have low voter turnout and a high pass rate, Arkansas’s sales tax burden has been creeping upward and upward. In addition to the cost a high tax burden imposes, taxpayers have also paid nearly $10 million for elections to increase their taxes.

Currently, cities and counties have a great deal of discretion when deciding when to hold special elections. Arkansas lawmakers considered a bill in 2017 that would change the timing of special elections. was designed to increase voter turnout by requiring that all special elections must be held at a primary or general election in even years, and in May or November in years without a primary or general election. Arkansas lawmakers considering similar legislation should understand the costs and benefits of allowing these special elections when considering changing the law concerning special elections. Limiting the timing of special elections to general and primary election dates would increase voter turnout, lower sales taxes in the long run, and save money by eliminating the need to pay for separate elections.

You can find a video of Dr. Horpedahl’s , starting at 10.25.55
You can find more of Dr. Horpedahls’ research here
You can find more of ACRE’s research on taxes and spending here

Where do Arkansas’s finances rank nationally?

Olivia Gonzalez, a research associate for the State and Local Policy Project at the Mercatus Center at George Mason University, spoke Thursday, November 29th about Arkansas’s fiscal health and ranking in the COB Auditorium.

According to the , Arkansas ranks 25th for fiscal health. Neighboring states that rank in the top five in fiscal health are Tennessee and Oklahoma.

The study analyzes state finances on five dimensions, then combines them to produce an overall ranking.

• Cash solvency: Does a state have enough cash on hand to cover its short-term bills?
• Budget solvency:  Can a state cover its fiscal year spending with revenues, or does it have a budget shortfall?
• Long-run solvency:  Can a state meet its long-term spending commitments? Will there be enough money to cushion it from economic shocks or other long-term fiscal risks?
• Service-level solvency:  How large a percentage of personal income are taxes, revenue, and spending? How much “fiscal slack” does a state have to increase spending if citizens demand more services?
• Trust fund solvency:  How much debt does a state have? How large are its unfunded pension and healthcare liabilities?

Gonzalez’s main suggestions were to improve Arkansas’s fiscal health by  increasing Arkansas’s rainy day fund and making sure that Arkansas is planning for longer-term financial commitments like pensions and implementing tax reform correctly.

Gonzalez said:

You can’t really talk about the fiscal health of a state without talking about tax reform. When North Carolina  implemented their tax reform they mostly lowered the rates, broadened the base and kept an eye on their expense side. Kansas on the other hand lowered tax rates, but they also narrowed the tax base even more and didn’t really keep an eye on the spending side of the equation. When you implement tax reform without taking into consideration your spending issues, you have more revenue-neutral or revenue-negative results.”

BT����Assistant Professor of Economics and ACRE Scholar Jeremy Horpedahl and Nicole Kaeding, Director of Special Projects at the Tax Foundation, expand on this idea and more in a research paper Learning from Other States’ Successes and Failures in Tax Reform released in May, 2018.

Horpedahl and Kaeding show that there are important lessons for Arkansas legislators to learn from other states and principalities when considering how to proceed on tax reform. Utah, Indiana, North Carolina and the District of Columbia implemented “smart, sensible” tax reform measures that can “dramatically improve competitiveness.” While the authors list multiple examples Arkansas should emulate, they also tell a cautionary tale about the “haphazard” tax reform efforts in Kansas mentioned by Gonzalez.

Gonzalez recommended states treat their finances like like a budget-savvy individual would treat their personal finances.

Gonzalez said:

State finance should be pretty straightforward. Things that matter for your personal finances like having enough cash on hand to pay short term bills, having more money coming in than you have going out and not paying for previous debt with new debt. These kind of common sense things matter for your state finances just as much as they do for personal finances.”

You can watch her full talk below: 

For more on this topic, visit our taxes and spending research page.

What are the trade-offs states make when offering economic development incentives to private businesses?

Prof. Nathan Jensen discussed this and more on Tuesday, November 13th in the BT����College of Business auditorium to a crowd of over 70 attendees.

Jensen is a Professor in the Department of Government at the University of Texas-Austin. He teaches courses and conducts research on government economic development strategies and business-government relations, among other things. He is a coauthor of the book with Edmund J. Malesky of Duke University. The book focuses on political incentives for economic subsidies.

Jensen explained that voters tend to give politicians credit for luring businesses through these incentive programs although they can be “expensive, distorting and ineffective.”

However, voter approval for these programs declines once they’re shown some of the tradeoffs.

For example, support for using property tax exemptions decreases when people are also asked to consider that this would lower tax revenues that support schools.  

Jensen said:

Voters love the use of incentives to bring jobs until you show them the costs. I don’t mean the dollar costs. I mean…what are the tradeoffs?”

Speaking of tradeoffs, here’s some of the alternative programs Arkansas could fund with the money it’s appropriated to Arkansas’s “Quick Action Closing” economic development incentive fund since 2007:

Jensen concluded his remarks with noting that such incentives rarely change firms’ behavior even though all states engage in such policy.

Jensen said:

Just because another state does something that’s stupid, it doesn’t mean you should too. There are unique things about Arkansas and there’s reasons why firms want to be here. There are reasons why firms want to be elsewhere. You just have to know that very rarely these incentives change firms’ investments.”

You can watch a video presentation summarizing Jensen’s research . A video recording of Jensen’s talk will be uploaded to the soon.

New Policy Review

Jensen’s visit wasn’t the only big news related to incentives on Tuesday. The Arkansas Center for Research in Economics released a new policy review entitled Government Accountability: 5 Fixes for Arkansas’s Quick Action Closing Fund by ACRE Policy Analyst Jacob Bundrick last week.

The review outlines five ways Arkansans can improve the transparency and accountability of the program.

The five reforms include:

• Improving reporting standards of the state’s use of the QACF
• Making clawback agreement formulas public and void of renegotiation
• Limiting the value of subsidies awarded on a per-job basis
• Paying subsidies awarded as project targets are achieved
• Capping the number of QACF projects allowed in any given year

For a one-page summary of Bundrick’s research on the QACF, go here. The full text of the policy review can be found here.

For more of ACRE’s research on targeted incentives, go here.

Arkansas Tax Reform and Relief Legislative Task Force members discussed three tax credits for possible elimination on Monday, October 29th.

The three insurance premium tax credits include the New Market Tax Credit ($16 M), the Low-Income Housing Tax Credit ($1 M) and the Home Office Tax Credit ($61 M). In total, these three credits cost the state approximately $78 million annually, according to the .

Insurance Premium Tax Credits

Task force members have spent the last year searching for credits and exemptions across the tax code to help raise revenue to help fund a broad tax reform package for the upcoming legislative session. Members heard from two experts last Monday about three insurance premium tax credits.

Arkansas currently has a . The insurance premium tax is a tax paid by insurance companies doing business in Arkansas.

Both speakers at the meeting agreed the revenue lost from these credits could be put to other uses, but differed on their solutions.

Arkansas Insurance Department Commissioner Allen Kerr said revenue savings from credit elimination or reform should go towards reducing the insurance premium tax rate in the state to better attract insurance businesses to the state.

Kerr said:

In order to draw business to Arkansas one of the best ways to do it is to reduce your overall (insurance premium) tax rate. If a state like Texas has a 1.75 percent tax rate for instance, there’s going to be a lot of companies build home offices in Texas.”

Nicole Kaeding, Director of Federal Projects at the Tax Foundation, said there was an “economic impact” from higher insurance premium tax rates, but these effects were “much lower” than taxes that are relatively high such as individual and corporate income taxes in Arkansas.

Kaeding is a co-author with BT����Assistant Professor of Economics ACRE Scholar Jeremy Horpedahl and other Tax Foundation experts in their book, ‘.’

Kaeding said:

I’d rather see you mitigate the more harmful taxes than the one that is less harmful. I think that these credits could easily be eliminated and that money could be spent elsewhere. I’m always thinking about how do we maximize economic growth. I think here the literature tells us that the Insurance Premium Tax is not as harmful as other taxes and if you can use these credits to offset other taxes that would be a better trade.”

Kaeding said both the New Market and Low-Income Tax Credits duplicate other programs, are complicated, and don’t tend to benefit low-income areas.

Kaeding said:

The literature is pretty clear that these credits are not effective. They tend to go to projects that probably would’ve been completed anyways.”

Task force co-chair Sen. Jim Hendren said after the meeting that the task force would decide in the next two months whether to make no changes or use the revenue savings to reduce taxes.

Tax Reform vs. Tax Incentives

In other task force news, Mike Preston, executive director of the Arkansas Economic Development Commission, discussed how Arkansas’s tax structure places it at a “competitive disadvantage” when competing for jobs nationwide. Among the areas Preston mentioned, were Arkansas’s top individual income tax rate of 6.9 percent and a corporate tax rate of 6.5 percent.

Preston said:

If you can correct the tax policy, you can lessen the amount of incentives we’d need.We have incentives that kind of help offset our tax policy. The way we stay competitive is we have to offer incentives to do that. That’s why we’ve been able to compete on projects. If we could find a way to bring that a little lower, that would lessen the emphasis that we’re putting on the incentives to make up that tax policy.”

Bills for 2019 Legislative Session

The task force also discussed seven bills to possibly be considered in the 2019 legislative session based on some previous task force policy recommendations.

as follows:

• An act to require biennial reports of tax exemptions, deductions, discounts, exclusions, credits, deductions, special accounting treatments and special rates relating to income tax, sales tax and use tax.
• An act to repeal certain sales tax exemptions for named entities and to create sales tax exemptions for various types of organizations.
• An act to reduce the corporate income tax rate on net income exceeding $100,000 from 6.5 percent to 5.9 percent.
• An act to provide for guidelines and penalties related to assessments for purposes of property taxes and to require the Assessment Coordination Department to establish mandatory guidelines for counties.
• An act to transfer the administration and collection of the franchise tax to the Department of Finance and Administration and to eliminate the franchise tax penalty on closed businesses.
• An act to provide for the annual indexing of motor fuel taxes and special fuel taxes to the consumer price index.
• An act to impose an additional registration fee on electric vehicles and hybrid vehicles. Revenues from these fees will be dedicated to highway funding.

Next Meeting

Task force members will meet again on 9 a.m., November 27th.

The Arkansas Tax Reform and Relief Legislative Task Force during the 2017 legislative session to:

• Modernize and simplify the Arkansas tax code
• Make the Arkansas tax laws competitive with other states in order to attract businesses to the states
• Create jobs for Arkansans
• Ensure fairness to all individuals and entities impacted by the tax laws of the State of Arkansas

More of ACRE’s research on taxation can be found here.

Based on their recent performance, it’s tempting to bet against the Hogs. If voters approve Issue 4 in November, you will be able to place that bet in future seasons. And while the only poll conducted on last month showed it trailing by a few points, don’t bet against this issue passing: the polling is as tight as the heartbreaking loss against Ole Miss. It’s not going to be a blowout like the Auburn game. Because of this, you as a voter have an incentive to be well-informed about the pros and cons of the issue.

Last May’s US Supreme Court ruling allows any state to legalize sports betting. , a proposed constitutional amendment that increases casino gambling would allow sports betting. If Arkansans pass this amendment, you could legally bet on the Hogs, major league baseball, or other sports of your choosing.

Remember this doesn’t legalize your office March Madness betting pool. You would still have to go through one of the four casinos.  But you could bet right here in Arkansas. It’s not right, but you could bet against the Hogs. If Arkansas wins you’re happy. If they lose, you still won your bet and that reduces the sting.

There are pros and cons to legalized sports betting in general and this initiative in particular. This issue would allow people who like to gamble on sports a legal way to do it in Arkansas, it will likely increase economic activity and tax revenue at least a little, and will probably not harm other related industries. However, it may increase problem gambling, it creates a legal near monopoly in this business and will create and entrench powerful special interests with the ability and the incentive to prevent future competition.

First, the pros, people who like to bet on sports would be able to legally do so. That’s a benefit to them – the freedom to place bets legally. Legal sports betting would likely create a few jobs at two racetracks, and potentially at two more casinos. Casinos may have small positive impacts on economic growth. The data specifically on sports gambling is sparse. The but it’s unclear if this would also be true of Arkansas casinos.

What about tax revenue? Sports betting would not create a lot of direct tax revenue for Arkansas. Consider that Nevada had about $4.8 billion in wagers on sporting events in 2017. Of that, casinos’ revenues were about $250 million, just over 5% of the amount bet. Using Delaware as an example, if Arkansas bettors would wager $50 million a year, of which the casinos would retain about 5%, or $2.5 million. Even if those revenues were taxed at 20%, then the state’s cut would only be $500,000.

Moreover, only 55% of the casino tax goes to the state’s general fund; the rest of it would go to casino-hosting cities, counties, and to increase awards for live racing at Oaklawn and Southland. There is a logic to putting some of the money back in the locale’s that host the casinos, but

How would sports gambling interact with other types of gambling in Arkansas? It’s unclear. Sports bettors are likely different people than lottery players, so sports betting probably wouldn’t affect the lottery. Sports betting would probably modestly help the racing and casino industries. While at the casinos or racetracks, sports betters might be inclined to bet on dogs or horses, or to play some slot machines. This effect isn’t likely to be too large in any case. But, it would probably persuade some Arkansans from gambling in other states.

Compared to the lottery, a tax on sports betting is likely to be less regressive because the average sports bettor is wealthier than the average lottery player.

Those are some pros, what about the cons? Gambling research has shown that around 1-2%of the general population has a gambling problem. Expanding gambling might lead to more “problem gambling” where people are gambling to an extent that it negatively impacts their personal or professional lives, or results in financial problems. However, there is an “adaptation effect.” When a new type of gambling is introduced, the problem gambling rate increases, but over time it falls back to its longer-term rate. We have casinos and lotteries so problem gamblers already have an outlet.

Issue 4 also does more than just allow sports gambling. This process gives a near monopoly licenses to new casinos. A competitive market would be more responsive to consumers. This is true for casinos and for sports betting.

States get to choose how gambling is regulated. Obviously, if Arkansas moves forward with casino legalization and sports gambling, the degree to which the taxes benefit county or city governments will depend upon how it is implemented. One study of casinos’ impacts on county-level per capita government expenditures and revenues found a positive impact from commercial casinos, but a negative impact from tribal casinos.

One problem with a constitutional amendment is that it doesn’t allow us to easily modify it if we make a mistake. Traditional legislation allows more room to modify as problems are discovered. There would still be regulation at the state and local level but the regulations could change more easily to fit new circumstances or correct unintended consequences.

As economists we think a free market where any company could go through the process and start a casino is better or a second best option is that the state could auction licenses for casinos and or sports gambling. The second suggestion would even bring in more revenue. Either would remove some of the advantages currently going to existing casinos.

If the legislature decides to legalize sports gambling , they could look for “best practices” from states like Nevada, Mississippi, and New Jersey, which have well-tested regulatory frameworks for gambling. Like other industries, the gambling industry should have transparent regulations that apply to all.

Regardless of how you vote on Initiative 4 there are many ways to expand gambling in the state. This is just one option and it has both good and bad parts from an economic perspective. The legislature could take up this issue in January. The economic growth or tax revenue gains to the state will likely be small but to those who want to gamble and those who want to provide gambling services, it’s also about their freedom to engage in these activities. The largest potential dangers come from entrenching special interests in the state constitution and isolating them from market competition. How voting Arkansans weigh these trade-offs remains to be seen.

Since its creation in 2007, state officials have allocated more than $185.7 million to the Quick Action Closing Fund (QACF). The program, which allows the state to provide discretionary cash grants to select companies, is intended to attract and retain businesses in Arkansas. But have these millions actually increased economic activity?

Research says “no.” In a 2018 study published in The Review of Regional Studies titled “,” BT����Associate Professor of Economics and ACRE Scholar Thomas Snyder and I found no evidence to suggest that QACF subsidies lead to increased employment or business establishments in Arkansas’s counties.

Our results suggest that providing targeted subsidies through the QACF is not an effective use of Arkansas’s tax dollars.

What else could Arkansas officials have done with $185.7 million?

1. Provide every taxpayer a one-time income tax refund of $124.[i]
2. Construct 55 miles of new 2 lane arterial road.[ii]
3. Establish a $185.7 million rainy day fund.
4. Provide a one-time bonus of $5,562 to every certified K-12 teacher.[iii]
5. Hire and employ 100 parole/probation officers for 46 years.[iv]
6. Hire and employ 100 public defenders for nearly 30 years.[v]

This list is by no means exhaustive. There are probably other equally worthy policies that Arkansas officials could prioritize.

The bottom line is that spending Arkansas’s limited tax revenue in unproductive ways is costly to the state and its residents. The evidence is clear: there are better uses of public money than providing subsidies to firms through the QACF.

[i] One-time income tax refund per taxpayer is calculated using the total number of Arkansas taxpayers based on calendar year 2016 income tax returns. Taxpayer data was collected from the Arkansas Department of Finance and Administration’s April 26, 2018 presentation to the Arkansas Tax Reform and Relief Legislative Task Force titled “.”

[ii] Miles of new 2 lane arterial road is calculated using the estimated cost per mile for a new 2 lane arterial road in an urban area.

[iii] One-time bonus for teachers is calculated using the number of certified teachers in Arkansas school districts during the 2018-2019 school year. Teacher data was collected from the .

[iv] The employment period of 100 parole/probation officers is calculated using the 2017-2018 GS07 minimum pay rate. Salary grade information for parole/probation officers was collected from . GS07 pay rate data was collected from the .

[v] The employment period of 100 public defenders is calculated using the 2017-2018 GS11 minimum pay rate. Salary grade information for public defender I’s was collected from . GS11 pay rate data was collected from the .