Big River Steel: A Bad Deal for Arkansas Taxpayers
The state of Arkansas has struggled during the Great Recession and the very tepid, post-recession recovery. Arkansas has lost 30,000 private-sector jobs since the beginning of 2007. Attracting businesses to the state of Arkansas is an essential priority, but instead of focusing on decreasing the size of government and lowering tax burdens—proven solutions to foster economic growth—Governor Beebe and his allies are handing out tax dollars to large corporations.
Big River Steel is a proposing a new $1.1 billion steel mill to be located in Osceola, in Northeast Arkansas. The mill is poised to create 500 well-paying permanent jobs and over 2,000 temporary construction jobs. In addition to the jobs created, the mill would expand the local tax base and help revitalize the area.
Unfortunately, state taxpayers will be on the hook for the deal. Governor Beebe and the Arkansas Economic Development Commission are opening the doors to the state treasury. Under the deal, Big River Steel will receive:
• $200 million in tax breaks
• $75 million in new state grants
• $50 million in a new state loan
And yet, that’s not all. The Arkansas Teacher’s Retirement System has invested $60 million of its funds. That’s an incredible $770,000 in state funding per job created at a time when Arkansas is over $3 billion in debt.
Arkansas fails to attract businesses because of its uncompetitive tax system. According to the Tax Foundation, Arkansas’s state business climate ranks 33rd and well below regional peers such as Kansas, Texas, and Tennessee. This broken tax code makes it hard for Arkansas to compete.
Risk to Taxpayers
This deal puts Arkansas tax dollars at risk and increases the state’s outstanding debt obligations. The state will need to issue $125 million in new bonds to pay for the new grants and loans and, even under the most optimistic of assumptions, will not receive the full $50 million loan back. Even the head of the Arkansas Economic Development Commission said this deal “is not without risk.”
Financial Incentives Do Not Matter
Companies will always ask state and localities for hand-outs; the less of their money at risk, the better. In the end, these incentives are not what truly attract a company to an area. Big River Steel was offered even more funding from the state of Mississippi, but it chose Arkansas instead.
Arkansas taxpayers have enough on their plates paying the nation’s 13th highest income tax. Rather than burdening Arkansans further and forcing them further into debt, we should use our resources to open more, equal opportunities for all.