Business-Friendly States Are Growing at the Expense of Those that Tax and Spend

The tenth edition of the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index has just been released, and once again, Utah was found to have the best economic outlook of any state in the nation. The rankings are based on 15 equally-weighted economic policy variables, including tax rates, labor policy, and regulatory climate. They continue to show that states valuing economic freedom and competitiveness outperform states adhering to the tax-and-spend model, with state economic policies having a substantial effect on where businesses and individuals choose to set up shop.

Taxes matter for economic competitiveness. People and businesses often seek out lower tax burdens across state lines. Rich States, Poor States data shows states that keep taxes low, avoid job-killing over-regulation, and follow prudent budget practices consistently and significantly outperform their highly taxed, over-regulated counterparts. Shown below are the top- and bottom-ten states in terms of economic outlook for 2017. Over the past decade, two states have made the top ten in the rankings every single year: Utah and Wyoming. In fact, after enacting tax cuts, a flat tax, and pension reforms, Utah has earned the top spot in all ten editions of Rich States, Poor States — a truly impressive accomplishment. On the other side of the spectrum, New York and Vermont have managed to land in the bottom ten each of the past ten years.

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This year, several states earned their best all time rankings in Rich States, Poor States. After enacting right-to-work legislation and aggressively cutting tax rates, Indiana, which sat at 24th as recently as 2012, claimed the second-best economic outlook in the nation this year. Texas and New Hampshire both also saw significant improvement in the 2017 rankings, earning their best marks to date.

By examining state-by-state migration trends, it is easy to see which states are enacting pro-growth policies. After all, Americans have shown that they are willing to “vote with their feet” for better economic opportunities even if it means leaving their home state. The top-ten states in the 2017 rankings have gained more than 3.75 million residents in the past decade. The bottom-ten states, meanwhile, have lost more than 3.78 million residents over the same period. In addition to experiencing a mass exodus of residents, states with oppressively high tax rates such as New York, Illinois, and California have lost vast economic opportunities and vast amounts of wealth. Job growth over the last ten years was nearly three times higher in the top ten states than it was in the bottom ten.

When state governments enact bad policy, individuals and corporations react rationally, working less, investing less, or moving to a more business-friendly state altogether. Growth-oriented states routinely prioritize core services in their budgets while minimizing the tax burden on residents. Poorly ranked states in the Index consistently stifle growth with higher taxes and increased regulation.

Of course, tax and fiscal policies are not the only predictors of economic growth. Demographics, climate, natural resources, and other geographic amenities remain important factors in state economic growth as well. But even adjusting for these other factors, states that embrace sound economic policies vastly outperform those that don’t. Coastal California may enjoy a better climate in its ten-day forecast than Texas for much of the year, but economic growth and migration patterns strongly suggest that the Lone Star State has a brighter future than the Golden State.

While free markets and low taxes enable resources to flow in a productive manner to meet the demands of consumers, markets distorted by government through cronyism, taxes, and regulation create lower output and stifle investment. In Rich States, Poor States, the 50 “laboratories of democracy” give us clear examples of this every year. Freedom works, and the Index proves it.

— Jonathan Williams is the chief economist and vice president of the American Legislative Exchange Council’s Center for State Fiscal Reform.

My NJ is # 48; we share many of the same afflictions as neighboring NY (and are trying many of the same futile remedies, like open borders). Years ago I posted that this dynamic was why Dems were so focused on nationalizing their socialism; they need to create a situation where there is no financial incentive to flee the high-cost states (by saddling the low-cost states with their “share of the burden”).

It is more complex than that; the pension burdens of some of the worst-off states make them automatically unfriendly in terms of taxes because they are basically operating giant pyramid schemes that have collapsed. Anyone moving to NJ or CA is simply buying a share in a massive IOU, and current revenues are diverted to those retired gubmint “workers” rather than providing current services. How business-friendly can a state be as the roads crumble and potential customers flee this financial mess? Even worse, unproductive Third Worlders are being trafficked into these states to keep the public school teachers employed, and that worsens the pension crises. There are two groups forming that are becoming increasingly mutually exclusive: Those that pay taxes, and those that use public schools.

Government “workers” now retired got the benefit of stealing our tax dollars for decades while doing absolutely nothing productive or useful. It’s time to cut off their big pensions and tell them they have sponged off of us long enough. As for public schools, well, we don’t need them. It’s time to just let taxpayers keep their money and let parents decide how to educate their kids —and for how long. After the 7th grade it’s almost all indoctrination in those government schools. Parents should be free to skip all that.

I wish...

As the teachers’ unions have changed the jobs from part-time classification (which they are, and historically were paid as such) to “full-time” classification (with ridiculous pay and benefits for 180 days, six hours per day), this pension problem is growing quickly. They have single-handedly ruined NJ as employers and taxpayers flee the scam; this year we were once again the highest in the nation for property taxes, 3/4 of which goes to our public schools (read: teachers).

I'm surprised that NH is not in the “Bottom 10”.

This year we had a chance to become a “Right to Work” state. And even with a Repub Governor, House, and Senate it could not be passed.

That combined with probably the highest electricity costs in the country should put us in the bottom of the pile ... unfortunately.

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