The American Legislative Exchange Council today released their 7th annual Rich States, Poor States report, which ranks states in two metrics: historical performance based on economic indicators, and forecasted outlook based on policy variables. Here’s the top and bottom 10 breakdown this year:
| Economic Outlook Ranking, 2014 | Economic Performance Ranking, 2002-2012 | |||
| 1. Utah | 41. Rhode Island | 1. Texas | 41. Massachusetts | |
| 2. South Dakota | 42. Oregon | 2. Utah | 42. Maine | |
| 3. Indiana | 43. Montana | 3. Wyoming | 43. California | |
| 4. North Dakota | 44. Connecticut | 4. North Dakota | 44. Wisconsin | |
| 5. Idaho | 45. New Jersey | 5. Montana | 45. Connecticut | |
| 6. North Carolina | 46. Minnesota | 6. Washington | 46. Illinois | |
| 7. Arizona | 47. California | 7. Nevada | 47. Rhode Island | |
| 8. Nevada | 48. Illinois | 8. Arizona | 48. New Jersey | |
| 9. Georgia | 49. Vermont | 9. Oklahoma | 49. Ohio | |
| 10. Wyoming | 50. New York | 10. Idaho | 50. Michigan |
It turns out that these policies matter. A quick look shows that Utah, North Dakota, Arizona, and Idaho appear in the top ten for performance and outlook, while Rhode Island, Connecticut, New Jersey, California, and Illinois appear in the bottom ten for both performance and policy.
The rankings are a valuable tool for understanding the impact of a variety of fiscal policies. The economic outlook ranking is determined in part by the quality of state tax systems (9 out of 15 variables), but also includes variables for debt service as a share of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenue, public employees per 10,000 residents, a variable for the quality of a state’s legal systems, and other fiscal measures.
North Carolina moved from 22nd to 6th in the outlook ranking, due in large part to beneficial tax reforms signed into law in 2013, and Indiana moved from 14th to 3rd, due in part to repeal of the state’s inheritance taxAn inheritance tax is levied upon an individual’s estate at death or upon the assets transferred from the decedent’s estate to their heirs. Unlike estate taxes, inheritance tax exemptions apply to the size of the gift rather than the size of the estate. in 2013 and cuts to the corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate that have been phasing in for the past few years.
The full report is here.
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