You Don’t Need to Wear Shades for Washington’s Economic Future
A new report by the nonpartisan American Legislative Exchange Council (ALEC) ranks the economic competitiveness in the 50 states, and while Washington’s rank over the past ten years (2000-2010) isn’t too bad, the future looks grim.
Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index analyzes two sets of state rankings. The Economic Performance Rank is a backward-looking analysis based on the past 10 years of economic data and takes into consideration income, population, and job growth. The Economic Outlook Rank is a forward-looking forecast based on states’ standing in 15 important state policy variables such as tax rates, regulatory burdens and labor policies.
Washington ranks a respectable 14th for economic performance between 2000-2010, but falls to a dismal 33rd for economic outlook. Translation—we have been doing just okay for the past decade, but the future isn’t so rosy as our state becomes less competitive relative to other states.
Utah impressively holds its number one economic outlook rank for the fifth year in a row, while New York ranks dead last at 50 for the fourth year in a row. The study attributes those results to Utah’s commitment to competitive fiscal policies and job creation, and to New York’s business-as-usual political cronyism and job-killing policies. The moral of the story—states that want a healthy and thriving economy should strive to be more like Utah and less like New York.
Of the 15 policy variables considered, study authors identify the three most important policies for economic competitiveness as first, no personal income tax, second, no estate or inheritance taxes, and third, right-to-work laws that protect worker freedom.
While Utah has a personal income tax, rates are relatively low and are balanced by a strong right-to-work law and the absence of an estate tax. In contrast, New York imposes the nation’s highest personal income tax, levies an estate tax and does not provide right-to-work protections.
Like New York, Washington levies an estate tax and does not provide right-to-work protections. Like New York, Washington has a much higher overall tax burden and generally less favorable business climate. That is why Washington ranks so much closer to last place New York than to first place Utah in the economic outlook. Washington’s saving grace is our state’s lack of a personal income tax. If state leaders were to take that away we would move precariously close to the wrong end of the ranking spectrum.
Washington Policy Center has long offered policy recommendations that would improve the state’s business climate. Ranging from rejecting a personal income tax, to reforming the Business & Occupation tax, reducing the overall tax burden, lowering the state’s high minimum wage and reducing workers’ compensation costs, these recommendations, if adopted, would go a long way toward saying that Washington is “open for business.”
