David Kinkade

Governor, Agencies Say Trivial Budget Cuts Would Be Devastating, Which Was Entirely Predictable!

February 21, 2012 David Kinkade Leave a Comment

Clipart by BestVector - http://clipartof.com/215955

Artist's rendering of Arkansas budget debate. Capital sparring, gents! (Clipart by BestVector)

You guys, this Arkansas budget debate! What a mess! Let’s see: House Minority Leader John Burris proposes cutting a handful of state agency budgets in a gambit to (very very very mildly) slow the rate of growth in state government. Gov. Mike Beebe, he does not like this at all, pal, mostly because he doesn’t appreciate challenges to his budgeting authority.

So Beebe tells the agencies to assess themselves and to let us know what effect these proposed budget cuts would have.

And the agencies report back…wait for it… that it’s just not doable! There will be lay-offs and reduced services and a famine will descend upon the land, should these draconian 3 percent cuts go into effect!

Think about that for a second. These state agencies, which typically expect as a matter of course to receive more money each year, suddenly find their budget preferences questioned by upstart GOP lawmakers. They respond back that they couldn’t possibly bear these cuts, based upon an assessment of their own needs. Guess we’ll just have to take their word for it.

On top of that, they were tasked with reporting their findings to their boss, the governor, who had already submitted his budget proposal. To respond in any other way would have made him look foolish. What kind of answer did you expect?

So we all recognize that it’s not at all surprising that they responded as they did, right?

And after all, a state agency would never, ever misrepresent its finances. Not in Arkansas. No way.

Because all state agencies are well-managed paragons of financial integrity.

And the state’s financial management processes are all air-tight, and the very model of effectiveness and efficiency.

And not least of all, we can trust this information, because it comes from the mouth of Mike Beebe, who is a legendary authority on the state budget. Actually, I don’t mean that one in a sarcastic way—by all accounts, Beebe really knows his stuff when it comes to state budgeting, I guess. They say he’s good at it, and who am I, a relative nobody, to question that expertise, anyway?

Of course, even if we take his expertise for granted, we could question the actual value of said expertise, given that state budgeting in general is a notoriously shabby and fraudulent enterprise. To be “good” at state budgeting probably isn’t much to be proud of; it’s kinda like being “good” at reading Sanskrit or making balloon animals or blogging. OK, great, you’re an authority on something that’s probably not all that worth being an authority on. What else ya got?

Beebe: GOP Budget Plan Mostly ‘Non-Starter’ (Arkansas News Bureau)

House GOP Leader Defends Budget Proposal (Arkansas News Bureau)

Filed Under: Arkansas Legislature, Arkansas Republicans, Gov. Mike Beebe, State Government is Too Damn Big Tagged With: Gov. Mike Beebe, john burris, state budget, tax reform

Report: Arkansas 6th In Nation for State, Local Sales Tax Rates

February 16, 2012 David Kinkade 1 Comment

Arkansas 6th for state, local sales taxes

Click for more

Our friends at the Tax Foundation are out with updated rankings on combined state and local sales tax rates, and here you go: Arkansas checks in with the sixth highest combined rates in the nation.

I’ll not belabor the point on that, as it’s something we’ve seen before. But it’s always a salutary reminder: since Arkansas legislators convened this week in Little Rock for a fiscal session devoted to budget matters, it’s worth considering what you’re paying in taxes and what you’re getting for your money. Pause to ask why it should be that, in most rankings we see, the Natural State should land so high. (You’ll recall our post from a couple of months ago about Arkansas’s high income tax rate, and how the state’s unfriendly tax climate dampens business and economic growth).

Just some food for thought as the powers that be in Little Rock joust over budget matters. Do with it what you will.

State and Local Sales Taxes in 2012 (Tax Foundation Fiscal Facts)

Filed Under: Arkansas Legislature, Tax Reform Tagged With: Gov. Mike Beebe, sales tax, tax reform

Beebe Keeps Pushing Dubious Education Ranking—And He Should Stop!

February 14, 2012 David Kinkade 1 Comment

Recently we cast a questioning glance at the claim peddled by Arkansas Gov. Mike Beebe that the state’s K-12 education system is “the fifth-best in the United States.” The governor bases the claim on the annual Education Week Quality Counts ranking released in January.

Trouble is, it’s not really true. The University of Arkansas Office of Education Policy issued a whiz-bang assessment of the problems with the rankings. They note that the overall state ratings, like the one Beebe trumpets, are “based on a convoluted (and nonsensical) combination of the individual indicators.” (In fairness, the UA ed wonks did note some strengths in the EdWeek data, as well.)

Yet Beebe continues to push the highly questionable “fifth in the nation” claim. As recently as last week in a radio address, Beebe explained how the education funding in his 2012 budget will “help continue our ongoing push for excellence in education, a push that has brought Arkansas up to number five nationally, according to Education Week magazine.” He never stops, this guy!

The Arkansas Leader is having none of that nonsense, mister, and they fire back with a scathing editorial that looks more closely at the results of the study. They argue, rightly, that the rankings pay too little attention to student achievement and other educational outcomes:

Not only did the state receive a “D” in student achievement, it also received a “C-” in chances for success, but it still ranked fifth in the nation. How can it be?

Simple: The study gave the state high marks in paperwork, vision and effort. Arkansas was awarded an “A” in standards, assessments and accountability. That means paperwork.

It also received an “A” in transitions and alignment — more paperwork, ideas and vision.

So the state is great at paperwork, but not in reality.

“Paperwork has become more important than achievement,” the Leader editorial concludes. Tough stuff, but perhaps that’s needed to get Beebe to stop pushing misleading and self-congratulatory claims about education in Arkansas. Or we can just change the state nickname to “The Paperwork State.” Really, I can go either way on this one.

Editorial: Phony Report On Schools (Arkansas Leader)

Filed Under: Arkansas Legislature, Education Reform, Gov. Mike Beebe Tagged With: education reform, Gov. Mike Beebe

Arkansas Lawmakers Sign On To Obamacare Challenge!

February 14, 2012 David Kinkade 1 Comment

…And the worthy effort to topple the rickety structure of the Affordable Care Act continues apace. The libertarian Cato Institute and a host of other organizations from the right side of the political spectrum, along with several hundred state lawmakers from points far and wide, have filed a friend of the court brief urging the Supreme Court to strike down this unholy law. Strike it down, they declaim!

Included on the list are 58 Arkansas legislators, all Republicans, whose names I’ll not list here because it would require retyping all them, which would be tedious. But they’re listed in the appendix of this PDF, so hurry yourself over there if you must know who’s on the list.

The question at hand, per the brief:

Can a limited government to whom a free people have delegated only certain enumerated powers commandeer that people into purchasing a product from a private business pursuant to its power to pass laws “necessary and proper for carrying into execution” the authority to “regulate Commerce…among the several States?”

Good question! But to discover the exciting conclusion, you’ll have to read the whole 53 page brief (PDF), so please clear off your schedule for the afternoon. And then get back to me with whatever the answer is.

I’ve written extensively about Obamacare here on the Arkansas Project, but my preoccupations have focused more on the law’s shoddiness and sloppiness and general overall air of incompetent ineffectuality, rather than questions of constitutionality or state sovereignty. So if you want more of that side of the argument, go check out the full document at Cato’s site.

ARKANSAS PROJECT FLASHBACK! In January, two members of the Arkansas Congressional delegation, Rep. Tim Griffin and Sen. John Boozman, signed on to another amicus curae brief protesting the individual mandate in Obamacare. Last summer, Lt. Gov. Mark Darr signed on to a similar challenge to the law.

(H/T those youthful firebrands at The Arkansas Patriot, who were all over this a full 24 hours ago)

Cato Files Supreme Court Brief on the Constitutionality of the Individual Mandate (Cato Institute)

Filed Under: Arkansas Legislature, Arkansas Republicans, Health Care Reform Tagged With: health care reform, health insurance exchange, obamacare

More Budget Scrutiny for State Agencies? Why, Yes, Let’s Have Some of That!

February 13, 2012 David Kinkade Leave a Comment

Erroneous headline alert! Erroneous headline alert! A story over at the Arkansas News Bureau reports that “After Forestry Commission flap, state agencies’ budgets to get more scrutiny.” I’m sure that “more scrutiny” was supposed to read “some scrutiny,” since it’s hard to believe most of these state agencies get any scrutiny at all.

Now that the financial shenanigans at the troubled Arkansas Forestry Commission have been flushed into the open and the appropriate heads have rolled (Forestry Director John Shannon, RIP), the realization is settling in that the mismanagement at that agency may not be an isolated case.

Thus, the bureau’s John Lyon reports, Gov. Mike Beebe and state finance chief Richard Weiss are responding to the sensible calls for greater attention to just what the hell is going on at all these executive branch agencies:

Weiss said the [enhanced budget watchdogging] job should be possible with DF&A’s existing manpower. Asked why it was not being done before, he said that level of scrutiny was not previously seen as necessary.

“The system we’ve had up until this point has done us well,” he said. “We have kept out of trouble, we have kept out of having deficit spending or any of these other things. This illustrated, though, that you could have people go out and certify things that weren’t necessarily true, so we’re going to try to monitor it more closely, as audit suggested.”

Well, yes, the “system we’ve had up until this point has done us well” and “we have kept out of trouble” insofar as no one asked any questions about potential financial mismanagement, and so it didn’t come to light.

But this is a salutary development, if it means that we’ll get closer scrutiny of some of these agencies that have been misusing and abusing taxpayer funds. Especially those agencies that function that are pass-throughs for large amounts of federal funding. But I can’t think of any right now (cough*Department of Workforce Services*cough), can you? No, nothing comes to mind.

In the same story, House Minority Leader John Burris offers up a vision of the future tinged with dark foreboding:

Burris said that especially with large amounts of federal stimulus money at their disposal, state agencies see one-time federal money as a means “to prop up problems in state government instead of solving them.”

“Games with numbers isn’t new in state government,” he said. “I don’t think this is the last time we’re going to see this happen.” (emphasis added)

Good point, House Minority Leader John Burris!

On a related note, did you guys watch the opening of the 2012 fiscal session? I watched it on the teevee. It’s always a stirring occasion— lawmakers gather in the spirit of legislative bonhomie, Gov. Beebe delivers an utterly forgettable speech, and then everyone heads to the Capitol Rotunda for the ceremonial lighting of John Brummett’s mustache. Really brings makes you proud to be an Arkansan, it does.

After Forestry Commission Flap, State Agencies’ Budgets to Get More Scrutiny (Arkansas News Bureau)

Filed Under: Arkansas Democrats, Arkansas Legislature, Arkansas Republicans, Gov. Mike Beebe, State Government is Too Damn Big Tagged With: arkansas forestry commission, Gov. Mike Beebe, john burris, unemployment benefits, workforce services

Arkansas Dems on Income: Intentionally Misleading or Just Ignorant of the Facts? (PART 2: The Exciting Conclusion!)

February 3, 2012 David Kinkade Leave a Comment

(Part One of this discussion, which you can read here, took place yesterday. Part Two will be shorter, I promise)

So yesterday we had a too lengthy, too windy and too pedantic discussion of income statistics in Arkansas, sparked by a dispute between GOP Rep. Charlie Collins of Fayetteville and the Democratic Party of Arkansas (DPA).

Are you up to speed on the difference between per capita income and median income? Do you care? Of course you don’t, because you are a normal human being with healthy interests, and the only income stats you really care about are your own. I’m not sure I care that much, either. But if we’re going to discuss it, we should at least be clear on what we’re talking about, and don’t go about clouding up the issue, as the DPA did in their shoddy attack on Collins.

Anyway, Collins got the essential facts right:

Arkansas ranks low in income statistics, whether measured in per capita or median terms;
Household income in the state is stagnant (and has declined since 2007); and
A reasonable discussion of why that is, and how it might be changed, should occur.

He gets credit for raising the issue, and doing so in a measured and civil manner, which is more than we can say for DPA mouthpiece Candace Martin.

I don’t intend to make a habit of close readings of party news releases, because whether they come from Republicans or Democrats they all tend to be overwrought and hysterical and shot through with fallacious reasoning and are more or less immediately forgettable. I only focused in on this piece from the DPA because it was so terrible on so many levels.

And also because it reveals a tactic that we’re seeing more frequently from the defenders of the status quo in Arkansas, as well as one that you should be on watch for in the heated campaigny months that lie before us:

1) Defenders of the status quo in Arkansas politics and government will glom on to any ranking or study that ostensibly reflects well on the state, without taking a critical look at just what that ranking means. We saw it with the “income growth” measure; Gov. Mike Beebe’s office reported the ranking as a “historic high,” which is true, except the “historic high” is still pretty low, and median incomes in the state remain stagnant.

We saw it last month with education policy, when Beebe breathlessly trumpeted the state’s #5 ranking in “education policy” from Education Week, and ignored a (probably more accurate) study that ranked the state’s education system #45 in the nation.

A cynical type might think that all they’re trying to do is get you to remember the top line numbers (“Didn’t I see something about Arkansas being fifth in education?”) to obscure any lack of progress that has occurred under their long command (with a few brief interregna in the governor’s mansion) of the state’s government. Some might even call that “misleading.”

2) Arkansas Democrats are also keen to portray anyone who points out the facts about the state’s lack of progress as “out of touch” or “talking down” the state. Look back at Martin’s release attacking Collins from last week: She accuses Collins of “badmouthing” Arkansas and “deriding the state.” Goodness!

Then, boy howdy, she really works up a head of steam: “It is bad enough when people from other states talk down about Arkansas, but for an elected official to do so, and falsely, is inexcusable,” Martin writes. Say, isn’t Collins from another state? Expect more of this.

Martin believes that it’s “badmouthing” the state or “talking down” about Arkansas when someone points out verifiable facts about the state, as Collins did. That’s a nice appeal to sentimentality, but it doesn’t do much to advance the discussion of what will move the state forward.

By this light, it’s better to tell “useful lies” rather than “harmful truths” (see quote at top of post; you were just wondering how that would tie in!). The lies are more pleasant, whether they are about income stats or education or whatever, and they allow the usual suspects to maintain their positions of power and privilege, instead of taking careful stock of where we stand and figuring out how we might do better.

Nice little racket they got there. And one wonders why the state continues to lag in so many indices. But not really.

Filed Under: Arkansas Democrats, Arkansas Legislature, Arkansas Politics, Tax Reform Tagged With: Arkansas Democratic Party, charlie collins, Gov. Mike Beebe, tax reform

Arkansas Dems on Income: Intentionally Misleading or Just Ignorant of the Facts? (PART 1)

February 2, 2012 David Kinkade 2 Comments

Why are Arkansas Democrats exaggerating the Natural State’s progress on income growth? Or more to the point, just how damn stupid do they think we are?

I was thumbing through the Wall Street Journal this morning, in the manner of all good plutocrats everywhere, when I came across this story about declines in household income over the last few years.

Citing a study by a Maryland-based consultancy group, the WSJ reports that 38 states saw a decline in median household income from 2007-2010, according to an analysis of Census data. Arkansas was one of those 38—in the Natural State, median household incomes dropped 2.9 percent. (Meanwhile, Washington D.C. led the nation with an 8.1 percent income INCREASE, “in large part because of federal government employment.” If you need me, I’ll be sharpening my pitchfork.)

That got me thinking: Wasn’t there a to-do just a few days ago in which the Democratic Party of Arkansas (DPA) took a Republican state legislator to task on this very question? Why, it turns out there was!

Rep. Charlie Collins

Here’s the deal: Some weeks ago, GOP Rep. Charlie Collins of Fayetteville published a letter to the editor in the Arkansas Democrat-Gazette’s northwest edition arguing that the state needs income tax reform to create jobs. Collins cited the slow growth rate in the state’s median income to suggest that Arkansas could be doing better. (For our discussion purposes, I’m pasting the text of Collins’ original letter below).

Last week, the DPA issued a news release charging Collins with “misleading” voters….

Actually, no, that’s not right. Let’s carefully read the lead of the DPA news release: it says that Collins’ letter “leaves voters to wonder if he was being intentionally misleading about Arkansas’s economy and deriding the state, or even worse, was he ignorant of the facts?”

Got that? They’re not actually suggesting Collins did all that bad stuff they just said; they’re not leveling a charge. It just “leaves voters to wonder” if there’s a charge to be made, by someone, maybe. Oh, my, this is an unprepossessing start.

Let’s read on. Here’s DPA spokeslady Candace Martin:

“What is worse, if Charlie Collins was intentionally misleading people and badmouthing Arkansas’s progress or if he was just ignorant of the facts? He owes the people of Northwest Arkansas an explanation,” Democratic Party of Arkansas Spokesman Candace Martin challenged. “Politicians shouldn’t use these lean economic times as an excuse to falsify facts or mislead Arkansans. Rep. Charlie Collins condemned Arkansas for making no economic progress when in reality USA Today ranked our state 11^th in the nation for personal income growth. It is bad enough when people from other states talk down about Arkansas, but for an elected official to do so, and falsely, is inexcusable.”

OK, here’s where it starts to get thornier. Martin invokes a USA Today ranking that says Arkansas is “11 in the nation for personal income growth.” But note the shift here: Collins in his letter writes about median incomes, not “personal income growth.” Moreover, if we follow the link to the Bureau of Economic Analysis data on which USA Today based its ranking, we see the data used is per capita personal income. So they’ve subtly changed the subject.

And here’s the thing: Per capita income and median income are not the same thing. Median numbers tend to be a more reliable measure because they aren’t swayed by extremely high or low extremes, and they’re more useful for comparing numbers over time.

If you look at per capita income, Arkansas does a shade better; moreover, if you look at the rate of growth in per capita income, you’re talking about something else entirely. So they’ve moved the discussion away completely from what Collins was talking about, and then they charge him with being “misleading.”

Candace Martin and the DPA seem confused on these issues (that’s the charitable interpretation). In paragraph 3 of the news release, they state that “Arkansas steadily moved up three rankings in the national average for median income at a time when other states were falling” (emphasis added).

Except that’s not quite right, based upon a reading of the data that they themselves provide. The news release points us to the Bureau of Business and Economic Research at the University of New Mexico, which reports that Arkansas moved up a few slots on per capita income, not median income, from 2007-2010 (from 47th to 44th).

Now, if you just go Google “state rankings median income,” you’ll get a number of results that show Arkansas languishing around 48th or 49th, which is in line with what Collins discussed in his letter. Like this. Or this. Go ahead, roll your own. Collins wasn’t “misleading” anyone.

I think Charlie Collins does know the difference between per capita and median incomes, since he’s careful in his letter to always refer to “median income,” and doesn’t sloppily swap the terms around.

Look back at that DPA news release, in which all the accusations against Collins are leveled as rhetorical questions, rather than actually flat-out making a charge that he was being “misleading.” It seems clear the Dems recognized they were on shaky ground, or they didn’t really care, because all they wanted to do was muddy the waters of the discussion, so the facts didn’t much matter.

Or we might put it this way: What is worse, if Arkansas Democrats were intentionally misleading people and exaggerating Arkansas’s progress on income levels, or if they were just ignorant of the facts?

You know, it really leaves voters to wonder.

WHAT YOU ARE PROBABLY THINKING: “Thank you, David, for that not at all fascinating discussion of a dispute over per capita and median income in a stupid party news release, which sounds like something Greenberg would write, because, ugh, Greenberg.”

But bear with me! There is, indeed, a point to all this! No really, there is! I think! But you’ll have to wait for the explanation as to why this matters in the EXCITING PART DEUX OF THIS POST (forthcoming!)

Collins letter follows.

Report: Arkansas #45 In Education? But Gov. Beebe Said We Were #5! (Updated!)

January 27, 2012 David Kinkade 2 Comments

Click for more

Hey, how was your National School Choice Week? Why, mine was lovely, thanks so much for asking!

We round out the week with a look at the latest Report Card on American Education from the good folks at the American Legislative Exchange Council (ALEC), ranking these 50 states for their performance on a variety of measures related to K-12 education.

OK, let’s take a look here (turns pages, turns pages, jesus this thing is long). Hmmm, Arkansas lands at number 45…But wait! Weren’t Gov. Mike Beebe and the Arkansas Dept. of Education just trumpeting news two weeks ago that Arkansas was fifth in the nation in education? I think they were! What gives, huh?

The study Beebe et al. were wetting their pants over was the Education Week Quality Counts 2011 survey, which ranked Arkansas #5 based on education policies.

But notably, the Quality Counts study gave the state “low marks in two areas two areas where the state has long struggled to advance: Student achievement and the chance for a successful career with an Arkansas education,” according to the Arkansas News Bureau’s John Lyon. Gosh, those kind of seem like areas where you’d want to get the high marks!

(In addition, here’s a good explanation of the shortfalls of the Quality Counts survey from a couple years back by all-around smart guy Stuart Buck from the University of Arkansas Dept. of Education Reform).

The ALEC study aims to provide a more comprehensive look at how state education performs based on student scores on the National Assessment of Educational Progress (NAEP). By their figuring, Arkansas lands at 45th in the nation. The ALEC study even gives letter grades for education policy, scoring Arkansas with a gentleman’s C.

The ALEC researchers are also heavy into various school reform measures, with high praise for different education reform programs in disparate states like Massachusetts, Florida and Indiana. To hear them tell it:

The past two years however have been crucial, however, in demonstrating that reform is not only necessary but in fact achievable. In the past, governors gave lip service to education reform but tended to simply increase spending and kick the can down the road. The 2010–2011 period witnessed something entirely different: lawmakers taking on the reactionary education establishment directly, and defeating them repeatedly.

States having passed reforms must move vigorously to implementation, given the huge difference between changing law and changing policy and opportunities for subversion. Reformers in other states should carefully study the comprehensive approaches of Florida and Indiana lawmakers. Dramatic improvement results from broad, rather than incremental, reform.

On a related note, you should go back and read Dan Greenberg’s Arkansas Project submission from last summer, Confessions of an ALEC Conspirator, which pooh-poohs all the paranoid liberal handwringing about the organization with a calm look at the facts about the role ALEC plays in policymaking. Facts! Is there anything they CAN’T do?

UPDATE: The gang at the UA Office of Education Policy put together a dynamite policy brief that explains both the strengths and weaknesses of the Education Week Quality Counts survey. Go read it, if that’s your thing.

Report Card on American Education: Ranking State K-12 Performance, Progress and Reform (American Legislative Exchange Council)

Filed Under: Education Reform, Gov. Mike Beebe Tagged With: ALEC, American Legislative Exchange Council, Dan Greenberg, education reform, school choice

Biz Tax Study Ranks Arkansas An Unimpressive 31st! (UPDATED!)

January 25, 2012 David Kinkade 3 Comments

We have established before how much I like the Tax Foundation’s studies and maps as a tool for exploring tax policy. In fact, when it comes right down to it, the Tax Foundation should probably be paying me for how frequently I pimp their work around here.

As Arkansas lawmakers gear up for a legislative session devoted strictly to budget matters, they should read this humdinger of a new study ranking all 50 states by the Tax Foundation “Business Tax Climate Index.”

The index is a magic alchemical stew of corporate, income, sales, property and unemployment insurance taxes used to determine how “which states’ tax systems are the most hospitable to business and economic growth.” That is of course a gross oversimplification of how the rankings were arrived at, but if you want to learn more then go read the study yourself, Mr. Technical Methodology.

Man, I’ll bet Arkansas comes out looking like a real peach, huh? Eh, not so much—your beloved Natural State checks in at #31. If there’s good news, it’s that Arkansas has climbed one slot since last year’s report, when we ranked #32. Why, should we keep up at this blistering pace, this state will be a veritable economic powerhouse by, uh, let’s see… 2044. Huzzah!

“But, but, but taxes aren’t the only thing that drive business decisions!” is what some of you might be sputtering right about now. Well, shut up, because economist Mark Robyn, who authored the study, covers that issue:

The modern market is characterized by mobile capital and labor, with all types of business, small and large, tending to locate where they have the greatest competitive advantage. The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.

It is true that taxes are but one factor in business decision-making. Other concerns, such as raw materials or infrastructure or a skilled labor pool, matter, but a simple, sensible tax system can positively or negatively impact business operations with regard to these very resources.

Furthermore, unlike changes to a state’s health care, transportation, or education system—which can take decades to implement—changes to the tax code can quickly improve a state’s business climate.

Oh, but read on, because there’s even more good stuff about the dangers of tax incentives and subsidies targeting specific businesses:

State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. This can be a dangerous proposition….

Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.

Robyn also includes a nicely comprehensive review of the economic debate over just how much taxes matter (pages 5-9) that you should totally check out. Print and read! Or what, you’d rather read yet another goddamn article about the Republican presidential primary or mindlessly scan the pointless ephemera in Twitter feed? Ugh, you disgust me. I don’t know how you live with yourself. Read this instead.

UPDATE: Ha ha ha ha ha! Michael Cook, a lockstep Democratic blogger who has never been troubled by an interesting or intelligent idea, sees everyone talking about the Tax Foundation study on Twitter, and leaps into action with this dandy:

Good work, Michael Cook! You have indeed Googled a report suggesting that two counties of the state boast a relatively strong economy. Case closed! Of course, and I can’t believe I have to point this out, this doesn’t exactly contravene the findings from the Tax Foundation, for a number of reasons, including that two counties are not the same thing as a whole state.

Moreover, if we just want to wave around competing studies, here’s one from the Brookings Institution (PDF) ranking the Little Rock area as one of the 20 weakest performing metro areas over the course of the economic recovery. Your move, Michael Cook!

Oh, man, can you imagine what it must be like to be Michael Cook? I can’t help but to think that I’d just literally die from the sheer existential humiliation.

2012 State Business Tax Climate Index (Tax Foundation)

Filed Under: Arkansas Legislature, Tax Reform Tagged With: tax foundation, tax reform

That Pesky Medical Device Tax: A Medical Manufacturing Insider Speaks Out!

January 24, 2012 David Kinkade Leave a Comment

Will medical device tax drive production overseas and stifle innovation?

We wrote here previously about the medical device tax tucked deep inside 2010 health care bill (Affordable Care Act or Obamacare, pick your poison). That’s a 2.3 percent levy on sales of all kinds of medical devices used in diagnosis and treatment (excluding items sold directly to consumers over the counter, like Band-Aids and such), expected to generate $20 billion over 10 years.

After my earlier post, I heard from some folks at Cook Medical, a medical device manufacturer located in Bloomington, Indiana, who wanted to talk more about the issue. Cook Medical makes and distributes thousands of products, including stents and catheters, for diagnostic and therapeutic purposes. I asked if they would talk on the record to give a fuller perspective on how the tax would affect their industry, and they agreed.

An industry leader’s perspective

In a phone conversation with Steve Ferguson, Cook’s chairman of the board, and John Eckberg, the company’s media relations director, I asked how this tax came to be—what policy discussions led to its being included as a funding mechanism for the president’s signature legislation? Ferguson’s answer offered a depressing, but not at all surprising, insight into how the health care reform bill developed.

“It wasn’t a policy discussion at all,” Ferguson said. “When you tried to have a policy discussion with [Congressional committee members and staff], their attitude was that ‘We just don’t care; we need the money’.”

Ferguson praised members from Indiana, like Sen. Evan Bayh and Rep. Baron Hill, both Democrats who have since left Congress, for leading opposition to the tax. They had some success, he said, cutting the tax in half from $40 billion to $20 billion over the next 10 years—but got no further.

The problem, Ferguson said, was that the Obama administration and Democrats in Congress insisted that the health care reform bill would create a “windfall” for device manufacturers—the reasoning being that, with millions of additional Americans being brought into the health care system, there would inevitably be greater demand for their products.

Ferguson dismissed that line of reasoning. Most of the newly covered beneficiaries under Obamacare, he said, would be younger people, who typically have less need for medical devices. He also noted that based upon results from Massachusetts—where former Republican Gov. Mitt Romney established a state health insurance program in 2006 similar to the federal effort—there would be no “windfall”: The demand for medical devices in Massachusetts, he said, tracks with overall national trends.

“I think that’s a fallacious argument,” Ferguson concluded.

Another common argument is that manufacturers can simply absorb the tax by passing the cost on to their customers—say, tacking on 2.3 percent to the cost of a stent or catheter. But Ferguson said that wasn’t likely, because device manufacturers are competing with other manufacturers from around the world who export and sell products in the U.S. To remain competitive, his company and other domestic manufacturers are limited in how much they can “pass on” increased costs.

He also noted that the device tax isn’t the only higher cost that Cook Medical faces—they’re also paying more for energy, utilities, employee health care, unemployment insurance and other items.

“If you add all of those together, are they gonna say I can pass everything on?” Ferguson said. “Someone who tells you that has never run a business.”

[Read more...]

Filed Under: Health Care Reform, Tax Reform Tagged With: health care reform, obamacare, tax reform