The fourth edition of "Rich States, Poor States," recently published by the American Legislative Exchange Council, is an excellent review of economic competitiveness among the states. Co-authors Arthur Laffer, Stephen Moore and Jonathan Williams use statistical analysis and anecdotal information to show that states with low tax burdens and regulatory hurdles have the best record of job creation and personal income growth.
State rankings are based on 15 criteria, including marginal income-tax rates, personal income-tax progressivity, the burden imposed by other taxes, the existence of a tax or expenditure limitation and a variety of legal and other economic policies. The complete list is available with a free download of the book at www.alec.org.
Williams says that capital goes where it's wanted, and the evidence certainly bears that out. But not everyone agrees.
Some critics say taxes and regulation have nothing to do with jobs and people migrating to low-burden states, saying it is simply weather-related. Certainly some of the best-performing states, such as Florida, have good weather, but other top-ranked states such as Utah and North Dakota aren't known for great weather.
Other critics believe that investment in infrastructure and equipment, labor efficiency, education and innovation are drivers of job creation and economic prosperity. Of course, by "investment" they mean government spending.
Having a good highway system and an educated workforce is important, but the measurement is not based on how much is spent. The test is whether a good highway system exists or whether the workers have the technical skills to be productive employees.
Fortunately, Kansas has a great highway system and a skilled workforce. But so do many other states. What those states don't have is an uncompetitive tax structure.
That's the point of "Rich States, Poor States." It's not about being competitive on a few items; you have to be competitive on everything.
There are a lot of states with great weather and good highways, and that invest a lot of money in education and innovation. But they also have lost jobs and have substandard growth in population and personal income.
"Rich States, Poor States" is loaded with good policy advice, but perhaps the greatest takeaway is that economic prosperity is a matter of choice. Some states choose to create an environment that encourages economic activity; others choose to put a higher value on government growth, which discourages job creation.
Kansas can't be complacent with its middling rank. "We're No. 27" isn't much of a slogan. In fact, Kansas is the only state whose average 2011 private-sector employment level is lower than its 2010 average.
We can either choose to continue the tax-and-spend mentality that continues to drive jobs away or we can choose to become prosperous.
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