The Leaflet: ALEC Releases New ‘Rich States, Poor States’ Report

Published April 14, 2016

For the ninth year in a row, Utah earned the top ranking for economic outlook in the newest edition of the American Legislative Exchange Council’s (ALEC) Rich States, Poor States report. The study was written by economist Arthur B. Laffer, Ph.D., Jonathan Williams, vice president for the ALEC Center for State Fiscal Reform, and Stephen Moore, a distinguished visiting fellow at The Heritage Foundation. This must-read report ranks all 50 states on 15 economic policies, including various tax, regulatory, and labor policies that give state lawmakers yearly comparisons of how policies are helping or hurting their economic outlook.

The top five states for economic outlook in the report are Arizona, North Carolina, North Dakota, Utah, and Wyoming. The bottom five states are California, Connecticut, New Jersey, New York, and Vermont. The most improved states compared to the 2015 rankings are Tennessee, which moved up 10 spots, and Florida, which climbed seven spots and now sits at eighth place. Georgia was the biggest loser in this year’s report; it fell 12 spots. Alaska also performed poorly compared to the 2015 report, falling 11 spots.

Over the past five years, Gov. John Kasich (R) and the General Assembly have cut income tax rates, eliminated the death tax, and constrained some spending. These reforms helped Ohio move up from having the 49th worst economic performance in the first Rich States, Poor States report – issued nine years ago – to being ranked 18th best in the nation in this year’s report. Ohio’s improvement marks the largest increase of any state over that period.

U.S. Sen. Tim Scott (R-SC) supports the policies recommended in the report. “By promoting pro-growth tax and fiscal policies, we can help every American unleash their full potential,” said Scott. “In South Carolina, we have seen these policies lead to an economic boom, with companies large and small choosing to locate and succeed in our great state. Publications such as this one serve as valuable tools to provide policymakers with a blueprint for job creation and economic success.”

U.S. Sen. Thom Tillis (R-NC) praised the publication, stating, “Most state legislatures across the country are focused on reducing spending, lowering taxes, and growing their economies. Rich States, Poor States continues to generate in-depth policy information that is critical to making decisions that will move states in a more economically sustainable direction. This publication is an important tool for policymakers, and I find it essential in understanding what makes each state competitive in a global economy.”

What We’re Working On

Budget & Tax
Research & Commentary: Maryland Considers the Flat Tax
Maryland legislators are in the midst of a major discussion on tax reform, one that includes corporate income tax reform and the possible implementation of a flat tax, which would replace the state’s current personal income tax structure, eliminating hundreds of deductions and greatly simplifying the state’s tax code.

In this Research & Commentary, Senior Policy Analyst Matthew Glans argues that instead of pursuing discriminatory taxes, states should focus on pro-liberty tax reform, which lowers rates, puts dollars back into the pockets of taxpayers, and tightens states’ budgets by creating new, reasonable limits on spending. “Sen. Serafini’s flat tax would lower rates, simplify the tax code for Maryland taxpayers, and it represents an important step in the right direction for tax reform in Maryland.” Read more

Constitutional Reform
Introducing Article V 2.0: The Compact for a Balanced Budget
As the federal debt approaches $18 trillion, a balanced budget amendment has emerged as one of few viable options to curb government spending. The Article V process for amending the U.S. Constitution, however, is long and tedious.

In this updated report for The Heartland Institute, originally published in July 2014, Nick Dranias, a constitutional law expert, asks the question, “[W]hat if the states could advance and ratify a powerful federal balanced budget amendment in just 12 months?” As Dranias explains, the Compact for a Balanced Budget could accomplish that task, “changing the political game almost immediately.” Read more

Research & Commentary: Illinois School Funding Plan
Members of the Illinois Senate introduced an amendment to a school funding bill on April 6 that would change the formula to determine how much state aid will be sent to school districts. The bill would reduce the role property taxes play in funding local school districts, placing a greater emphasis on state funding. This would entail shifting funding from more affluent school districts to poorer school districts. If passed, the bill would cost the state $600 million in its first year and includes a $200 million infusion of state monies into Chicago Public Schools’ debt-laden teacher pension fund. In this Research & Commentary, Policy Analyst Tim Benson argues, “Reforming Illinois’ teacher pension system and ending administrative bloat are two of the more prominent ways to guarantee more educational funding makes its way to back into the classrooms, where it can be used where it is most needed: on the students themselves.” Read more

Energy & Environment
Research & Commentary: Hiking Missouri’s Gas Tax Will Not Solve Road Funding Woes
Missouri legislators are now considering a substantial increase in their state’s motor-fuel taxes. The tax hike, proposed by state Sen. Doug Libla (R-Poplar Bluff) recently passed in the state’s Senate and is expected to receive a final vote in early April. The current proposal, if approved by voters in a statewide referendum in November, would increase the state motor-fuel tax by 5.9 cents, increasing the tax from 17 cents per gallon to 22.9 cents per gallon.

In this Research & Commentary, Senior Policy Analyst Matthew Glans wrote, “Gasoline taxes are ineffective, regressive, and have increasingly left transportation systems shortchanged. Gas taxes also disproportionately shift the burden to low-income drivers, a group that typically owns older, less fuel-efficient vehicles.” Glans writes critics of the gasoline tax increase proposal say legislators “should not use the current dip in gasoline prices as an excuse to hike taxes, and they note a tax hike would raise prices on goods and services throughout the economy, not just on gasoline. These increased costs are passed on to consumers.” Read more

Health Care
Research & Commentary: States Should Not Block the Growth of Optical Telemedicine
Several states, including Indiana, Nebraska, Oklahoma, and South Carolina, are considering new laws that would ban the use of new telemedicine technologies that would enable patients to receive a prescription for glasses or contact lenses using a vision test they administer themselves on a laptop or smartphone. Telemedicine can provide health care services to more people who need it at a lower cost, but it is currently being hampered by government regulations, not by inadequate technology or a lack of demand.

In this Research & Commentary, Senior Policy Analyst Matthew Glans argues against reforms limiting telemedicine: “Allowing one industry’s lobby to block technology that could benefit thousands of patients is unfair and unjustifiable. The government should not be in the business of choosing winners and losers. Instead of enabling blatant cronyism, state legislators should work to encourage telemedicine by reforming licensing standards to allow physicians to treat patients across state lines and to work to streamline credentialing.” Read more

From Our Free-Market Friends
Ohio Leads Nation Two Years in a Row in Transparency
The U.S. Public Interest Research Group awarded Josh Mandel, Ohio’s treasurer, the top spot for the second straight year in its newest ranking of state government transparency. Ohio received a perfect score in this year’s report, thanks to the cutting edge Ohio Checkbook website. Mandel raised the bar for government transparency and serves as an example of what good, transparent governance ought to look like for the other 49 states. The Buckeye Institute played a role in helping Mandel pursue this important initiative. Mandel said a recent press conference, “The Buckeye Institute has been a terrific partner on this transparency initiative. They were pioneers in this space well before I was doing it and continue to be today.” Read more