Landing Some Opportunities (Editorial)

Although he may not appreciate being compared to E.F. Hutton, it is true that when Warren Stephens talks, people listen. They may not always take his advice - Stephens' evergreen idea about consolidating city governments in Pulaski County doesn't seem to get any traction, no matter how much sense it makes - but they do listen.

Stephens gave a timely talk to the Arkansas Municipal League about the current opportunity for Arkansas to lure businesses away from struggling states like California and Illinois. In Stephens' opinion, Arkansas would be in a better position if its income tax structure was friendlier, but if he offered a specific suggestion on how to get there, it wasn't included in the Arkansas Democrat-Gazette's report of his speech.

The devil is always in the details.

Stephens was not entirely correct when he said "there isn't one" major company headquartered in Arkansas that was attracted from another state. It's true that Wal-Mart, Tyson Foods, Dillard's and J.B. Hunt Transport Services - examples given in the Democrat-Gazette's report - are home-grown. So is Stephens Inc., so is Murphy Oil, and we're proud of all of them. But there are some awfully good and sizable companies here, including Baldor Electric Corp. of Fort Smith and the company now known as America's Car-Mart Inc. of Bentonville, that started elsewhere and relocated their headquarters to Arkansas.

Come to think of it, Car-Mart came from Texas, where there is no personal income tax (although, contrary to popular belief, Texas does levy a corporate franchise tax that is similar to what we know as a corporate income tax). DAC Technologies Group International was started by Arkansans, and its official corporate headquarters has migrated to Little Rock from no-income-tax Florida. And when Alltel spun off its wireline division and merged it with Valor Telecommunications of Texas, the resulting Windstream Corp. didn't take that natural opportunity to adopt Valor's home state.

Not to beat this horse too much, but it is also notable that when Atlantic Tele-Network Inc. of Salem, Mass., bought divested Alltel assets, it chose to leave its new subsidiary, Allied Wireless Communications Corp., in Little Rock.

Now, Warren Stephens' point is fair: The biggest companies in Arkansas are natives. We could even bolster his argument with a reminder that Arkansas has lost corporate headquarters to states without income taxes. Southwest Energy Corp., formerly of Fayetteville and now of Houston, comes immediately to mind, as does Fidelity National Financial Corp., which bypassed Little Rock for Florida when it acquired the former Alltel Information Services. (It also bypassed Texas.) But wouldn't the same likely be true of any state, regardless of its tax structure? Wouldn't most of any state's biggest companies be home-grown, and wouldn't there be examples of wins and losses all over the country for any number of reasons?

In the absence of a workable alternative to our state's current tax structure, we can still sell Arkansas as a great alternative to California and Illinois (which in one fell swoop raised its corporate taxes by 46 percent and its income tax rate by 66 percent). The very stability of our state government and its tax structure, despite its flaws, are nothing to sneeze at. Texas may not have a personal income tax, but it does have a surprise budget deficit that required $27 billion-with-a-b in cuts to fill.

The most important thing we need to remember when approaching economic development is that overeager wooing of low-wage jobs is what got us into the situation we're in: too many low-income families needing too many taxpayer-subsidized services, creating a larger tax burden on middle- and upper-income earners. Warren Stephens is right: this is a great time to recruit some great new corporate citizens to our state.