Today, the American Legislative Exchange Council (ALEC) released the fourth edition of its annual Rich States, Poor States report, authored by Arthur Laffer, Stephen Moore and ALEC’s Jonathan Williams. This helpful report provides a current snapshot of state economic conditions and ranks the states along such metrics as income tax rates, property and sales tax burdens, recently enacted tax policy changes, debt service as a share of tax revenue, public employees per 1,000 residents and more.
From the executive summary:
In chapter 1, the authors examine the states’ fiscal conditions and discuss the new possibilities for future fiscal reforms. This chapter focuses on this year’s top performing states and those that continue to struggle. Data from the latest U.S. census demonstrates that taxpayers continue to vote with their feet by moving to states with more competitive business climates. The evidence from population changes over the past decade speaks for itself.
According to the 2010 census, the nine states without personal income taxes, which accounted for only 19 percent of the overall popuation at the start of the decade, experienced 35 percent of all population growth in America. This chapter also outlines key threats to states’ financial health, including unsustainable government pension plans and other anti-growth policies.
Chapter 2 surveys recent initiatives for fiscal reform in 2010. The authors congratulate Washington state voters for resisting an economically damaging income tax ballot initiative and address how California’s cap-and-trade plan promises to damage the state’s economy, while doing little to affect greenhouse gas emissions. They also analyze more ubiquitous factors influencing state economies, such as escalating health care and labor costs.
In chapter 3, a simple roadmap for regaining state prosperity highlights the policies best suited for creating jobs and sparking economic growth. This chapter provides four key guiding principles lawmakers and other decision makers should follow to strengthen the economy in their states.
Finally, chapter 4 is the much anticipated 2011 ALEC-Laffer State Economic Competitiveness Index. The index provides two distinctive rankings for each state. The first, the Economic Performance Rank, is a backward looking measure based on a state’s income per capita, absolute domestic migration, and nonfarm payroll employment—each of which is highly influenced by state policy. This ranking details states’ individual performances over the past 10 years based on the economic data.
The second measure, the Economic Outlook Rank, is a forecast based on a state’s current standing in 15 policy variables, each of which is influenced directly by state lawmakers through the legislative process. Generally, states that spend less, especially on income transfer programs, and states that tax less, particularly on productive activities, such as working or investing, experience higher growth rates than states that tax and spend more.
In this year’s edition, the top 10 states on economic performance were (from 1 to 10, in order): Utah, South Dakota, Virginia, Wyoming, Idaho, Colorado, North Dakota, Tennessee, Missouri and Florida. Rounding out the bottom of the list were: Pennsylvania, Rhode Island, Oregon, Illinois, New Jersey, Hawaii, California, Maine, Vermont and New York.