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Rich States, Poor States

Rich States, Poor States, 2014 Edition

By Arthur B. Laffer, Stephen Moore and Jonathan Williams of the American Legislative Exchange Council

From ALEC.org
From ALEC.org

Throughout the country, states are looking for ways to energize their economies and become more competitive. Each state confronts this task with a set of policy decisions unique to their own situation, but not all state policies lead to economic prosperity.

Using years of economic data and empirical evidence from each state, the authors identify which policies can lead a state to economic prosperity. Rich States, Poor States not only identifies these policies but also makes sound research-based conclusions about which states are poised to achieve greater economic prosperity and those that are stuck on the path to a lackluster economy.

The 2014 economic outlook ranking is a forward-looking measure of how each state can expect to perform economically based on 15 policy areas that have proven, over time, to be the best determinants of economic success.

Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index is an annual economic competitiveness study authored by economist Dr. Arthur Laffer, Stephen Moore, chief economist at the Heritage Foundation, and Jonathan Williams, Director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council.


2014 Economic Outlook Rank
  1. Utah
  2. South Dakota
  3. Indiana
  4. North Dakota
  5. Idaho
  6. North Carolina
  7. Arizona
  8. Nevada
  9. Georgia
  10. Wyoming
  11. Virginia
  12. Michigan
  13. Texas
  14. Mississippi
  15. Kansas
  16. Florida
  17. Wisconsin
  18. Alaska
  19. Tennessee
  20. Alabama
  21. Oklahoma
  22. Colorado
  23. Ohio
  24. Missouri
  25. Iowa
  26. Arkansas
  27. Delaware
  28. Massachusetts
  29. Louisiana
  30. West Virginia
  31. South Carolina
  32. New Hampshire
  33. Pennsylvania
  34. Maryland
  35. Nebraska
  36. Hawaii
  37. New Mexico
  38. Washington
  39. Kentucky
  40. Maine
  41. Rhode Island
  42. Oregon
  43. Montana
  44. Connecticut
  45. New Jersey
  46. Minnesota
  47. California
  48. Illinois
  49. Vermont
  50. New York
Economic Performance Rank
  1. Texas
  2. Utah
  3. Wyoming
  4. North Dakota
  5. Montana
  6. Washington
  7. Nevada
  8. Arizona
  9. Oklahoma
  10. Idaho
  11. Alaska
  12. North Carolina
  13. Oregon
  14. Virginia
  15. South Dakota
  16. Colorado
  17. Hawaii
  18. West Virginia
  19. Florida
  20. Nebraska
  21. Arkansas
  22. South Carolina
  23. New Mexico
  24. Iowa
  25. Tennessee
  26. Delaware
  27. Georgia
  28. Kentucky
  29. Louisiana
  30. Alabama
  31. Maryland
  32. Kansas
  33. Minnesota
  34. New Hampshire
  35. New York
  36. Vermont
  37. Pennsylvania
  38. Indiana
  39. Mississippi
  40. Missouri
  41. Massachusetts
  42. Maine
  43. California
  44. Wisconsin
  45. Connecticut
  46. Illinois
  47. Rhode Island
  48. New Jersey
  49. Ohio
  50. Michigan


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  1. Tom Yamachika

    Here is a comment on the study from the Office of Sen. Sam Slom (R):

    News Release from Office of Sen Sam Slom

    Honolulu – October 10, 2014 — Senator Sam Slom has serious concerns about Hawaii’s economic outlook. In the most recent edition of “Rich States, Poor States” published by the American Legislative Exchange Council, Hawaii is ranked the worst state in three categories:
    ◾Sales tax burden – $42.62 per $1,000 of personal income is taken in sales tax[1] – (Hawaii does not have a traditional state sales tax but does have the broadest “general excise tax” (GET) in the nation, which when equated to sales tax is the single most burdensome tax on goods in the nation.[2])
    ◾Estate/Inheritance tax is levied – 16% estate tax resulting in Hawaii receiving approximately $6.9 million in death and gift tax in 2013 (Hawaii is listed under “Where not to die”[3]); and
    ◾Right-to-work state – option to join or support a union does not exist – do a job usually done by a union member and you have to be a member.[4]

    Hawaii is also ranked #48 (1=best, 50=worst) for a top marginal personal income tax rate (11.00%), and is only beat out as the worst state by New York at 12.7% (#49) and California at 13.3% (#50). At least 9 states do not tax personal income, and most others are in the single digits.

    U.S. state corporate tax rates show Hawaii at only 2.4% below (39.2%) the worst state of Iowa which is at 41.6% of combined federal corporate tax and state corporate tax. Note, Mexico’s combined federal and state tax rate is 30%, Korea is at 24.2%, and Ireland’s combined rate is 12.5%.[5]

    As for investment, in 2014 Hawaii ranks the 16th worst state or country out of a list of 77 for a top marginal capital gain tax rate of 29.4%

    When it comes to the number for tax expenditure limits, Hawaii ranks one point above the states with the worst or least amount of expenditure limits[6]. Overall for ranking for economic outlook, Hawaii came in at #40 out of 50 states[7], which is an increase of 6 points but that increase can be explained by the #1 rating calculated on our pre-2014 minimum wage increase (ranking based on $7.25 per hour). It is expected that Hawaii will fall from this top spot as the authors of Rich States, Poor States state that “The Congressional Budget Office recently reported that raising the federal minimum wage from $7.50 to $10.10 an hour would destroy about 500,000 jobs by pricing low skilled workers out of the labor market. …every 10% increase in minimum wages causes about a one to three percent decline in low wage jobs. This is no way to help the poor. …Most small businesses’ primary expense is labor and increasing the minimum wage means increasing labor costs. This means that some businesses that are on the edge of profitability and cannot absorb these costs will end up going out of business.”[8]

    Rich States, Poor States also indicates there is cumulative domestic migration loss of 26,409 people from 2003 to 2012, with a net domestic migration loss of 2.4%.[9]

    Slom said today “I agree with the authors of Rich States, Poor States when they write “Most politicians know instinctively that taxes reduce the activity being taxed – even if they do not care to admit it. Congress and state lawmakers routinely tax things they consider “bad” to discourage the activity.”([10]) We see this when we tax tobacco and alcohol. Why then, does our Legislature continue to have the highest sales tax burden and some of the highest personal income tax rates in the nation. When is our government going to get it? You can’t overtax the people to support bad spending habits, and then expect people to stay and invest in our state.” Slom added “The Senate Minority has consistently introduced bills to alleviate these burdens. Unfortunately, the majority has consistently blocked these efforts to relieve taxpayers.”

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