Economist Stephen Moore: Arkansas Should Drop Income Tax

Noted economist and Wall Street Journal columnist Stephen Moore was in Little Rock Thursday urging lawmakers to work toward eliminating the state's income tax.

Moore met with a group of GOP legislators including House Speaker Davy Carter, R-Cabot, at the state Capitol before speaking Thursday night at Harding University's American Studies Institute Distinguished Lecture Series.

Moore, known for his conservative economic views, is a strong advocate of free-market policies, supply-side economics and the flat tax. He serves on the Wall Street Journal's editorial board and is a frequent contributor to National Review, Fox News, CNBC and CNN.

In between stops, he told Arkansas Business that state lawmakers now have a chance to restructure the state tax system to benefit their constituents.

"We talked about how to make Arkansas a high-growth state," he said. "I encouraged them to cut the income tax rate as much as possible."

Moore suggested a broader sales tax or higher taxes on energy to replace the revenue. Moore believes the new GOP majority in the Legislature provides an opportunity for movement on the issue. He told Republican legislators they now "have the power to make these kinds of changes." But he stressed it had to be done in a bipartisan way. It can't be a one-party thing, he said.

Moore said Arkansas' 7 percent income tax rate puts the state at a competitive disadvantage against neighboring states have lower rates or no income tax. Moore noted Arkansas' conversion from a predominately Democratic to a predominately Republican state, and he said it thinks the red states of the South -- generally right-to-work with low tax rates -- will become more Republican, while the blue states of the North will become more Democratic.

In the next 10 to 12 years, the "entire South could be income tax free," Moore said. If Republicans hold on to majorities in the state Legislature and a Republican replaces the term-limited Gov. Mike Beebe, he predicted Arkansas could be income tax free in 2014.

Moore titled his lecture at Harding, "The Comeback of Capitalism," and he thinks that comeback will begin in the South.

"The South will rise again economically," he said. "This is where all the growth is."

Moore, an Illinois native, said the pro-business environment of the South will continue to cause a migration of workers, jobs, businesses and capital.

He said Arkansas is in a good position to capitalize if it will do something about its tax rate.

"There are good universities here, land is cheap," he said. "There are a lot of natural advantages that would make Arkansas an attractive option for business."

Moore said Harding contacted him about speaking at the lecture series a year ago. He called the Harding series something he'd always wanted to do and "one of the most prestigious lecture series in the South."