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The Hidden Costs of Federal Grants

Is there ever a good reason for state governments to refuse federal grants? Some people would say no; notoriously, a few years ago. Gov. Mike Beebe said that accepting Medicaid expansion money was a “no-brainer,” because whether Arkansas accepted the money or not, state taxpayers would still be on the hook for it.

A new paper by the Advance Arkansas Institute’s Marc Kilmer, however, suggests that there are plenty of good reasons to refuse federal grants. Perhaps the best reason is political scientist Eric Fruits’s new research, which demonstrates that every dollar Arkansas gets in grants leads to 59 cents in additional taxes, charges, and other revenue. In “How Federal Grants Increase Arkansas Taxes,” Kilmer shows that the costs to Arkansans of receiving federal grants are often much higher – and the benefits much lower – than commonly realized.

Here’s the paper.

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