Leader Blues

Wednesday, November 02, 2005

EDITORIAL >> Asaís goof on sales tax

Asa Hutchinson is a redder but wiser man today after his embarrassing blunder in front of the State Chamber of Commerce. Maybe it will make him a more careful candidate and a better governor, if the voters give him that chance.

Hutchinson laid out his economic development theories for the chamber delegates, starting with exempting manufacturers from sales taxes on the energy they use in their plants. He said Arkansas would have landed a big steel mill in Mississippi County with hundreds of new jobs if the mill did not have to pay sales taxes on electricity. The owner decided to build the plant in Mississippi instead.

An Arkansas Democrat-Gazette reporter told Hutch-inson after the speech that the millís owner had not mentioned that as a reason for going to Mississippi instead of Arkansas. Hutchinson said he knew what he was talking about and implied that a source told him the real reason. The next day the owner of the mill said taxes on electricity had nothing to do with the move because he would not have had to pay taxes on electricity in Arkansas. A state legislator from Mississippi County and others rushed to point out Hutchinsonís error. Steel mills and certain other manufacturers have been exempt from the sales taxes on their energy since far back into the Bill Clinton administration at Little Rock. Lawmakers and presumably every economic developer in the state knew that. Hutchinson belatedly acknowledged his mistake. An aide said the candidate had misread a newspaper article about the plant.
One lesson we hope Mr. Hutchinson has learned is the emptiness of that old bromide so enduring in Arkansas, that the key to economic development is to relieve industries of having to pay the taxes that ordinary people have to pay, in this instance the tax on the energy they consume in their homes. Companies are always happy to have a tax break but it rarely builds the economy. But here is an even easier lesson. The steel mill owner said the big reason he picked Mississippi over Arkansas was that energy over there costs so much less. The question Hutchinson should be asking is, why is that? (Clue: Itís not taxes.) After all, Arkansas is a big supplier of natural gas, and its gas fields are expanding even into our own environs in White County. Moreover, the severance tax on Arkansas-produced gas is only three-tenths of a penny per thousand cubic feet, which the lowest in the nation and less than one-hundredth of the tax levied by gas-rich states like Texas and Oklahoma. And most of Arkansasí electricity is generated by economical nuclear and coal-powered plants rather than expensive gas.

Hutchinson can begin by asking his fellow Republican, Gov. Huckabee, and Huckabeeís chosen Public Service Commission, which regulates utility rates, including, if the PSC chooses, the cost of the generating energy that utilities pass along to homeowners and industrial customers without even a cursory review. That will help explain why we lose jobs to Mississippi, Tennessee, Texas and Oklahoma. We canít wait for that exchange.