GOVERNMENT POLICY AGAIN DIFFERENTIATES GROWTH VS. DECLINE

For the fifth year in a row, government policies differentiate growth in state economic performance.

Arthur Laffer and Stephen Moore, again in their American Legislative Exchange Council Rich States – Poor States Economic Competitive Index, document key government actions that encourage and restrict economic vitality.

 Policies for growth include –

  •     Lower personal income taxes
  •     Lower corporate income taxes
  •     Lower sales taxes
  •     Right–to-Work business cost advantages

According to Laffer and Moore, the opposite of these growth policies are the “growth killers” with death taxes being added to the “killer” list by them.

Laffer and Moore provide a strong argument that “low taxes, limited government and fiscal discipline are a recipe for job creation”, the benefits of supply-side economics.

They present a convincing argument for the conservative republican based economic platform being played-out in the election rhetoric and in the news media.

They conclude “no income tax states outperform their higher tax counterparts across a board in gross state product growth, population growth, job growth, and perhaps shockingly even in tax receipt growth”.

Using fifteen policy variables they have ranked each state economic outlook and encourage the reader “to read the evidence and learn about the proven principles, which lead to economic growth, job creation and higher standards of living”.

Of importance to us Midwesterner’s is how does Illinois, Indiana, Michigan and Ohio “stack-up” with other states; the 50-state ranking data for each –

 

                           2012     2011   2010    2009    2008

  • Illinois            48        44        47        44        43
  • Indiana           24        16       20         17        12
  • Michigan        17        25       26         34        47
  • Ohio              37        38       42         45        47

According to the 2012 rankings, Illinois would be noted as the worst with Michigan being the best; a result of Illinois increasing and Michigan lowering business taxes. 

Ohio while improving, remains behind Michigan and Indiana.

They note that Indiana’s ranking will likely improve in subsequent rankings due to the passage of Right-to-Work legislation not recognized in the current ranking.

It’s interesting to note that the best states are principally located in the south and western United States – Utah, South Dakota, Virginia, Wyoming, North Dakota, Idaho, Missouri, Colorado, Arizona, and Georgia, being the top ten states.

These states have –

  •   Population in-migration
  •   Lower tax burden
  •   Are Right-to-Work states
  •   Increasing their proportion of US GDP

I subscribe to this pro-growth low tax – less expense line of thinking.

After 30+-years as a community planner, economic developer and entrepreneur, it is evident to me that business and people “vote with there feet” and seek to live and work in communities that provide employment opportunities and lifestyles that meet or exceed their economic goals.

In this line of thinking, when all is equal, people will migrate to communities where personal economic benefits are greater.

Therefore, the notion that governmental policy that directly impact the personal or business “pocketbook” will influence where one chooses to locate influencing the economic vitality of the community.

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