High tax states in the U.S. are at the bottom when it comes to economic growth, according to the latest data released Monday from The American Legislative Exchange Council (ALEC).
“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,” ALEC’S “Rich States, Poor States 2019” report said. But the report, which examines trends in economic growth among the 50 states using variables like tax rates and migration, also reveals that some of those high tax states currently have strong economic variables that beat their lower tax competitors..
Utah ranked No. 1 in the report’s gauge of economic outlook, New York ranked at the bottom, No. 50. But the report shows New York outpaces Utah right now in the rate of GDP growth measured over a 10 year period between 2007 and 2017. By that metric, New York ranked third while Utah ranked fifth.
Another example is California and Florida. In the rankings for economic outlook, California ranked No. 47 and Florida, which has no income tax, ranked No. 8. But when you compare those two states’ rate of GDP growth, over a 10 year period, the report says California ranked in the top ten at No. 8, while Florida ranked in the bottom half at No. 33.
“Some states aren’t seizing their golden opportunity to become more competitive, and their economies will suffer for it,” said ALEC’s Chief Economist Jonathan Williams, who bases that prediction on another economic variable included in the report, called Absolute Domestic Migration.
During the period from 2008 to 2017, Utah saw a net gain of new residents ranking No. 12 among the 50 states, in the report’s measurement of migration. New York, on the other hand, lost more than 1 million residents and ranked last. Williams said the report tracks the significant interstate migration that occurs every year.
“This migration directly influences the economic and political makeup of states,” he said, adding that Americans are voting with their feet. “They are voting strongly in favor of the states that have created a free market environment conducive to economic growth and opportunity.”
A big part of the report’s variables to determine rankings are based on taxes. For instance, New York’s top marginal income tax rate of 12.7% places it at No. 49 almost the worst among the 50 states. California ranks last at 13.3%. New York’s top marginal corporate income tax rate 17.23% ranks it at almost the worst in the U.S. Utah, however, has a top marginal income tax rate of 4.95% placing it at No. 16, among the best of the 50 states. And Utah’s top marginal corporate income tax rate, 4.95% is tenth best in the U.S.
The report was written by Williams, Arthur Laffer, an economist and advisor to President Ronald Reagan and Stephen Moore who President Trump plans to nominate to the Federal Reserve Board of Governors.
Adam Shapiro is the co-anchor of Yahoo Finance’s On the Move.