Monday, December 10, 2007

Should we be surprised? Taxes are anti-growth

From the National Center for Policy Analysis - Daily Policy Digest


An economic rating of the 50 states shows that those with the lowest taxes, government spending and regulatory burdens attract the most newcomers, say Arthur Laffer, president of Laffer Associates, and Stephen Moore, senior economics writer for the Wall Street Journal.

According to a study by the American Legislative Exchange Council:

* Over the past decade, the 10 states with the highest taxes and spending, and the most intrusive regulations, had half the population and job growth, and one-third slower growth in incomes, than the 10 most economically free states.

* In 2006 alone 1,500 people each day moved to the states with the highest economic competitiveness from the states with the lowest competitiveness.

Of all the policy variables examined, two stand out as perhaps the most important in attracting jobs and capital. The first is the income tax rate:

* States with the highest income tax rates -- California and New York, for example -- are significantly outperformed by the nine states with no income tax, such as Texas and Florida.

* As a study from the Atlanta Federal Reserve Board put it: "Relative marginal tax rates have a statistically significant negative relationship with relative state growth."

The other factor for attracting jobs and capital is right-to-work laws:

* States that permit workers to be compelled to join unions have much lower rates of employment growth than states that don't.

* Many companies say they will not even consider locating a factory in a state that does not have a right-to-work law.

The study also finds that states with antigrowth tax and spending policies don't just lose people. Noncompetitive states like New York, Michigan, Pennsylvania, Illinois and New Jersey are plagued by falling housing values, a shrinking tax base, business outmigration, capital flight and high unemployment rates, and less money for schools, roads and aging infrastructure. These factors of decline hurt the poor the most.

Source: Arthur Laffer and Stephen Moore, "The (Tax) War Between the States," Wall Street Journal, December 10, 2007.

Note - According to the WSJ, Ohio was in the bottom 10. While there are news stories about the report, I could not find a complete copy of the study.


Tim Higgins said...


The surprise is that the rest of us haven't relocated to these havens of clearer thinking. The premise that government, any government can serve the needs of its citizens better than they can themselves by confiscating the money that they earn "for their benefit" seems ridiculous, yet we seem to believe. We overlook graft, waste, and pointless bureaucracy; considering them simply a cost of living.

And yet, such studies show a hope that we may not have gone to far down the path of ignorance. Thomas Paine in "The Rights of Man" said, "Ignorance is of a peculiar nature; once dispelled, it is impossible to re-establish it." Perhaps some of us (not us here in NW Ohio of course), are beginning to see the light. Maybe even some local or state governments, though that seems pretty far-fetched.

We can only hope that whatever is going on out there might be contagious. I hate to stoop to an "X-Files" reference, but "The truth is out there".

Hooda Thunkit said...

The truth is that politicians believe what they want to, despite any evidence to the contrary.

That's primarily what separates the politician from the political leader, IMNHO.

kateb said...

Tim - I will be fleeing as soon as I am able. I have some obligations first - but after having done some traveling this summer - most people don't live with these completely self-manufactured problems in their daily lives. And I think that's great. Baby - that's for me :-)

Maggie - no sarcasm intended - I do think that the Mayor, BCC and city council are all aware that increased taxes and 'fees' (back door tax revenue) are anti-growth but they've painted themselves into a very uncomfortable corner.

Now, I'm surely no defender of them - or the decisions that lead to the decline that we're now experiencing but we are where we are - now.

The city leaders are facing a steadily declining populace outpaced only by the rapid exodus of jobs/businesses. Where exactly are they supposed to get the money to run our government when there is such a rapidly shrinking tax base?

We need a strong leader who will develop a long term plan for our city. We need a council and Mayor that passionately welcomes businesses to Toledo and has a strong desire to keep any remaining businesses.

I know of several people that I believe would make fantastic leaders with a sincere drive to make a better way - but the Blade and the unions wouldn't go for it if history is any marker. You've got to be one of the players to be allowed into the game here in Toledo.

Note that our next generation of local political leaders are in our public schools today.

Yet if you point out that our school district is delivering an education to them that is one step above academic failure/emergency - people start the name calling routine.

But that's always easier than acknowledging the problems - b/c once they're acknowledged polite society feels an obligation to assist in resolution. If you can't get rid of the message - shoot the messenger.

So - full circle - with these problems getting worse over time and the available tax base rapidly becoming unavailable - where are they to get the money?

Maggie Thurber said...

Kate - I did a new post with a link to the actual study...It makes multiple recommendations for what states should do...I've put a call in to one of the state reps to see if we can have a discussion about the recommendations on Eye On Toledo...

we'll see...

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