In the next six years, the United States will become energy independent and even dominant, a national economist told Arkansas business leaders Wednesday.
The reason is the boom in oil and natural gas production from drilling in shale formations, said Stephen Moore, chief economist at the Heritage Foundation in Washington, D.C. Moore spoke at the 86th annual meeting of the Arkansas State Chamber of Commerce at Little Rock's Statehouse Convention Center. The Heritage Foundation promotes conservative public policies.
The boom will likely cause the country to pivot from an oil and gas importer to an exporter by 2020, said Moore, who formerly covered the economy and public policy for The Wall Street Journal.
"I believe this energy revolution is a complete game changer for our economy and also our national security," said Moore, who added that the United States is well ahead of other oil producing countries in drilling technology. "We're now spending $320 billion a year importing [oil]."
There may be other changes intended to improve the economy as a result of a midterm election that gave Republicans control of the U.S. Senate, Moore said.
One change could be construction of the Keystone pipeline, Moore said. The Keystone pipeline is an oil pipeline system from Canada to refineries in the United States.
There also could be corporate tax reform in the next few years, said Moore, who said that the U.S. corporate tax rate is the highest in the world.
Moore expects the decline in gasoline prices to continue, with a drop of another 10 to 20 cents a gallon likely. The average national price of a gallon of regular grade gasoline Wednesday was $2.92, according to auto club AAA. In Arkansas, the average price was $2.78.
Moore touted what he considered to be the benefits of lower taxes, particularly states that have no income tax.
He cited the examples of Texas and Florida, two states without an income tax, and two states with income taxes among the highest in the country, California and New York.
"People are moving from the Midwest and the Northeast to the South," Moore said.
Tax rates in California and New York are as high as 13.5 percent, Moore said. So if someone moves from one of those states to a state without a income tax, that's like getting a 13.5 percent raise, Moore said.
Some might suggest that warmer weather in the South is the reason for the migration, but Moore said that doesn't account for those who move from San Diego to Houston.
Businesses are moving, too. Since the recession ended, Texas has added 1.1 million jobs, more than the rest of the country combined, he said.
With Arkansas' recent election of a Republican governor along with a Republican majority in the state House and Senate, Moore said he'd like to see Arkansas become the 10th state in the country without a state income tax.
But with Arkansas being reliant on income taxes for a large share of its revenues, it is not easy to eliminate taxes quickly, Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, said in an interview.
"There is obviously some transition that would have to take place," Pakko said. "It's not as simple as saying, 'Income tax go away.'"
Taxes aren't the only thing that prompt a business to move from one state to another, Pakko said.
"But they are a consideration," Pakko said. "It's generally the [state] chamber's position that low taxes are good for business and economic growth. So it's not surprising that their guest speaker would say something like that."
Business on 11/13/2014