STATE OF THE RECOVERY

Summary: Arkansas jobs growth trails national and regional averages six years into the recovery. States without income taxes lead the nation.

(June 2015) Six years after the Great Recession ended, Arkansas payroll employment growth trails the national average, 8.2 to 4.2 percent, a Policy Foundation analysis of Bureau of Labor Statistics records show.

BLS records show Arkansas also trails the southeast regional average, 8.0 to 4.2 percent. States without income taxes, as a group, bested the U.S. in jobs creation, 12 to 8.2 percent. Texas leads this group of states.

Arkansas vs. National Average

Total Arkansas nonfarm payroll employment was 1,161,300 in June 2009 when the Great Recession ended¹ Preliminary numbers show 1,209,900 employed in May 2015, a 4.2 percent growth rate for the period. National employment, by contrast, increased from 130,944,000 (June 2009) to 141,619,000 (May 2015), an 8.2 percent growth rate.

Arkansas vs. Southeast Region

Florida--a state without an income tax--led the 12-state southeast region in jobs creation, increasing employment from 7,221,100 (June 2009) to 8,059,100 (May 2015), an 11.6 percent growth rate. Tennessee only taxes dividends and interest, and recorded a 9.8 percent job creation rate. Volunteer State jobs grew from 2,605,700 to 2,860,800 in the period.

Total southeast employment increased 8.0 percent from 31,623,400 (June 2009) to 34,143,400 (May 2015) versus Arkansas' 4.2 percent rate.

States Without Income Taxes vs. U.S.

Texas borders Arkansas and led all states without an income tax in jobs creation. Texas jobs increased from 10,285,500 (June 2009) to 11,788,700 (May 2015), a 14.6 percent rate. States without income taxes, as a group, recorded 12.0 percent growth in the period. Arkansas' growth rate topped only Wyoming among this group and trailed most states that do not levy income taxes by margins of more than two-to-one.

Conclusion: Tax Rates Matter

Tax rates, a skilled work force and infrastructure are all factors of economic development. Arkansas, in the first area, is noncompetitive versus other states, levying a top 6.9 percent income tax rate, second highest in the region, according to the Federation of State Tax Administrators.² Arkansas also levies a capital gains tax, which places it a disadvantage versus states in the region such as Florida and Texas that do not tax investment. Arkansas is unlikely to top national or regional job creation rates until policymakers solve this economic problem.

--Greg Kaza

² http://www.taxadmin.org/fta/rate/ind_inc.pdf