The Road to Prosperity Is Paved With Free-Market Policies

By Arianna Wilkerson <AWilkerson@heartland.org>

Why do some states prosper while others languish? According to the most recent edition of Rich States, Poor States, the answer is quite simple: “Bad ideas have consequences.”

Authored by renowned economists Arthur Laffer, Stephen Moore, and Johnathan Williams, Rich States, Poor States (RSPS) ranks the 50 states on their economic performance and outlook. The economic performance ranking is based on three backward-looking variables: state gross domestic product, absolute domestic migration, and non-farm payroll employment. The economic outlook ranking is based on 15 current variables, including personal and corporate income tax rates, property and sales tax burdens, state minimum wages, and workers’ compensation costs.

As expected, the states that have implemented spending and tax cuts and deregulation enjoy the most robust economies. The five states with the best economic outlook are Utah, Idaho, Indiana, North Dakota, and Arizona. The top five states for economic performance are Texas, Washington, North Dakota, Utah, and Colorado. Utah has been number-one on the economic outlook ranking for eight years in a row.

Not surprisingly, all of these states, except Indiana, had the highest population influxes on a percentage basis from 2010 to 2017. Americans vote with their feet. U.S. Census Bureau migration data reveal millions of Americans are moving their families and businesses to states that offer business-friendly environments and affordable living costs. Florida and Texas—two states with no personal income tax—experienced the highest domestic migration inflows from 2005 to 2016.

Not coincidentally, the exact opposite trend occurred in states at the bottom of the economic outlook and performance rankings. California, Illinois, and New York suffered a net population loss of more than a million residents over the same 11-year timeframe. In 2018, Illinois endured the largest population exodus of any state and is on track to lose two congressional seats in 2020. Rhode Island is set to lose one of its two congressional seats, and Connecticut is in the midst of a decade-long population drain. Unfortunately, this trend is likely to continue. Polls show 43 percent of Connecticut’s residents are looking to leave within a couple of years.

As can be expected, high taxes, unfunded public pension liabilities, rampant corruption, and lack of jobs plague these states more than others. However, lawmakers with their anti-growth policies have driven out high earners and job creators (and those who can afford to move)—leaving behind an underclass bearing more and more of a growing tax burden.

Fortunately, these policies can be reversed. Legislators in any state can promote and pass legislation that can spur an economic renaissance and population resurgence. In other words, if bad ideas have bad consequences, then good ideas spark good consequences.

%d bloggers like this: