ALEC Releases Rich States, Poor States Report

MacIver News Service | June 22, 2011

According to the American Legislative Exchange Council’s  “Rich States, Poor States Economic Competitiveness Indexreleased Wednesday, Wisconsin’s economy has clearly not yet turned the corner.

“In the wake of the recent protests in Wisconsin and several other states, Americans are taking a much closer look at the grim budget realities facing our states today,” according to the report. “Wisconsin Governor Scott Walker correctly points out that his state’s current budget trajectory is unsustainable, and he is not alone.”

The Rich States, Poor States Index notes, “The financial state of the states is not encour-aging. Driven by irresponsible state and local spending growth, which have steadily outpaced private sector growth over the past decade, cur- rent budget deficits are estimated to exceed $100 billion in the upcoming fiscal year.”

The study ranks Wisconsin at 45 for current economic performance, and places the Badger State at 30 for their economic outlook rank. To calculate the outlook rank, the authors took into account 15 state policy variables including top income tax rates, various other tax burdens, the amount of public employees, and whether or not unionization is forced upon the state’s public and private sector employees

The study suggests states adopt a “priority-based budget.” A key to this perspective on a state’s budget is to carefully examine the role of government. The study reports governments must properly understand their role in order to provide the services people need, while also protecting individual rights. The study encourages legislatures to focus on the core functions government and to avoid wasting time and money on nonessential and trivial undertakings. Along with this suggestion, the report includes ten golden rules of taxation; sometimes called the ten commandments of supply-side economics.

Generally, states with low income taxes perform better than states with higher income taxes year after year. Texas, where 4/10 jobs created last year in the United States reside, has no income tax.

“Bloated state spending levels and trillions of dollars in unfunded government employee pension liabilities pose huge financial obstacles to economic recovery in the 50 states today,” the report asserts.

In most states, government spending growth has steadily outpaced private sector growth.

The top ranked states for current performance and outlook are Wyoming and Utah respectively. The study calls the pension reform in Utah  “undoubtedly one of the most important legislative accomplishments on fiscal reform anywhere in America in recent years.”  Utah also voted to ban union card-check measures.

States at the bottom of the list for performance were California, Indiana, Illinois, Ohio, and Michigan in last. Coming in last for the economic outlook ranking were Hawaii, California, Maine, Vermont, and New York in last.

One of the criteria for determining economic performance was whether or not people were migrating to a particular state. An example of this is the case of Hawaii and Alaska, arguably the best and worst climates in America. In spite of the much more favorable weather in Hawaii, the population of Alaska grew at a faster rate. The study is a must read for all state legislatures and any concerned with economic state of the United States.

The study was authored by Dr. Arthur B. Laffer, Stephen Moore of the Wall Street Journal, and Jonathan Williams, director of the Tax and Fiscal Policy Task Force at ALEC.