Susquehanna Business Life

Economic Development

In the past year, Pennsylvania's economic outlook fell from 36th most competitive to 42nd, according to a new report from the American Legislative Exchange Council. The second edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index offers a roadmap for economic recovery based on state policies that have a proven impact on growth.

Rich States, Poor States

Poor labor policies, the presence of a state "death tax," along with the some of the highest corporate taxes in America all hurt Pennsylvania's economic outlook, according to a new report from the American Legislative Exchange Council (ALEC). Also of particular concern is the state's rapid accumulation of debt from years of borrowing. On the positive side, the study gives good marks to Pennsylvania for having a flat tax on individual income.

Among bordering states, Maryland's economic outlook ranks 28th, Delaware ranks 31st, West Virginia ranks 33rd, Ohio ranks 45th, New Jersey ranks 46th, while New York ranks dead last at 50th nationally.

Financial stability?

The report shows how federal stimulus dollars may simply encourage out-of-control state spending, which is up 124 percent over the last 10 years, without requiring states to make the tough decisions needed to bring about financial stability.

"States were quick to increase spending and add programs during the good times," said Rep. Stan Saylor, a member of ALEC's Tax and Fiscal Policy Task Force. "Now we need to make tough choices to live within our means and right-size our budget. The best solution to our budget woes is to control state spending and promote policies that foster economic growth and job creation."

Co-author and economist Dr. Arthur B. Laffer summarized the report's findings when he said, "States cannot tax their way into prosperity." Rich States, Poor States presents rankings of the 50 states based on the relationship between policies and performance—revealing which states are best positioned to make a recovery, and which are not.

Steps to economic growth

Laffer and his co-authors, Steve Moore, senior economics writer at The Wall Street Journal, and Jonathan Williams, director of the Tax and Fiscal Policy Task Force for ALEC, analyze how economic competitiveness drives income, population, and job growth in the states. They found that, "states with a high and rising tax burden are more likely to suffer through economic decline, while those with lower and falling tax burdens are more likely to enjoy robust economic growth."

"The top performing states keep taxes, spending, and regulatory burdens low, while the biggest losers in the book tend to share similar policies of high tax rates, unsustainable spending, and regulation," said co-author Williams. "State governments that believe they can bring about economic recovery by growing government and increasing taxes are sadly mistaken."

To learn more about the state-to-state comparisons, see the individual state analysis, and view the full report, download it for free at alec.org.