State Facts
Analysis
Arkansas ranks higher on personal than economic freedom. It scores particularly poorly on regulatory policy and worsened noticeably in 2009 to 2010; however, this change is largely an artifact of apparent sampling error in the 2010 lawsuit climate survey by the US Chamber of Commerce: Arkansas dipped dramatically in that year’s survey but has since recovered in the 2012 survey, which is not included in this index. When the change in lawsuit climate is excluded, Arkansas’s freedom score is only slightly negative from 2001 to 2011.
While its taxes and government spending are only about average, Arkansas has one of the lowest debt burdens in the country: 14.5 percent of personal income. Arkansas’s Revenue Stabilization Law, requiring ex post balanced budgets, deserves some credit for this advantage.1 Arkansas spends more on education and public welfare than the average state and has high state and local sales and use taxes to make up for low property taxes.
The state could significantly improve its regulatory environment by repealing its health insurance mandates, which add an estimated 45.9 percent to the cost of a premium compared to one without any of the mandated coverages. “Prior approval” rate review is in place for both small group and nongroup health insurance. While local zoning is limited, the state has utterly failed to reform eminent domain. Labor laws are generally good, with a right-to-work law in place. Occupational freedom is limited, with the extent of licensure a standard deviation worse (higher) than the national average and education/experience requirements particularly onerous. Cable and telecom markets are unreformed. The aforementioned lawsuit climate is poor, even if not quite as bad as the 2010 measure would suggest.
Like other states without large metropolitan areas, Arkansas scores well on certain personal freedoms. Arkansas has virtually no regulation of private schools, and its homeschooling laws are better than average, excepting notification requirements. Mandatory kindergarten attendance is in place. Smoking is banned in restaurants but not bars, and cigarette taxes are moderate by comparison with many other states. The incarceration rate is high, about two-thirds of a standard deviation worse than the national average.
Policy Recommendations
- Reduce state grants to local school districts and enhance local tax autonomy, and cut the state sales and use tax.
- Prohibit private-to-private eminent domain transfers and tighten blight standards.
- Reform sentencing for nonviolent offenders to reduce incarceration rates toward national norms. This change alone would have moved the state up two places in the overall freedom ranking. 1. We are grateful to an anonymous reviewer for this information.
