by Timothy McQuiston Vermont Business Magazine Vermont once again is 49th (second worst) in the 2015 ALEC "Rich States, Poor States" report, which was released last week. New York ranked 50th (Vermont and New York have occupied the last two spots in each of the reports eight years). Meanwhile, Utah was first, North Dakota was second and Indiana third best. The Northeast and Mid-Atlantic states, as usual, took a beating in the report, despite having many of the highest-income states.
The cover shows profiles of "Rich" state capitals backed by mountains, while the reflection shows profiles of "Poor" state capitals. Albany, NY's distinctive capital is reflective of its poor standing in the report. The report indicates that the "Rich" states in the West and South are gaining ground while the Northeast is becoming the new "Rust Belt."
The ALEC report is based mostly on taxes and tax policy. For instance, Vermont in the subcategories ranked 49th for Personal Income Tax Progressivity and 48th for Property Tax Burden, but fifth for Debt Service and seventh for Sales Tax Burden. There are also non-tax items factored in, like workers' compensation and minimum wage (high is bad and Vermont ranked 47th). Being a "Right-to-Work State" (a union-option question) is also bad but is not supported by data as to why this is so; still the state ranked 50th.
Nor is the report indicative of actual wealth within a state. There, Vermont is 14th (just below North Dakota and above the national average), while Indiana, for instance, is 39th (below the average). SEE TABLES BELOW.
The ALEC report, co-authored by Reagan-era economist Dr Arthur Laffer, seeks to change policy at the individual state level to reduce tax burdens and other costs to businesses, because where there is less cost there is more opportunity for future growth. So, the report is not a snapshot of existing economic conditions as it is an attempt to be predictive of future prosperity.
"Made up of nearly one-third of America’s state elected officials, the Council provides a unique opportunity for state lawmakers, business leaders and citizen organizations from around the country to share experiences and develop state-based, pro-growth models based on academic research, existing state policy and proven business practices." Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index is published by the American Legislative Exchange Council. It was published January 21, 2016.
It also takes issue with state policies that "play favorites," either in state tax incentives or in tax policy itself, while advocating broad-based, low tax rates. The report blasts New York, for instance, for its "START-UP NY" program.
"While many states took positive steps toward eliminating tax cronyism, New York continued to rely on tax-carve outs. New York ranks dead last in the Rich States, Poor States ALEC Laffer State Economic Competitiveness Index, and the state has also given out 52,132 tax carve-outs to select companies, more than any other state. The track record of New York’s latest tax-carve out, START-UP NY, clearly shows picking winners and losers with the tax code is not a viable economic development strategy. A recent audit by New York Comptroller Thomas DiNapoli found the state spent $45 million to advertise START-UP NY but only “created” 76 jobs. For each job created thus far, taxpayers have spent a staggering $697,368.Once again, New York shows tax carve-outs fail to promote real economic growth."
Meanwhile it praises Kansas' recent change in tax policy, which has otherwise come under very heavy criticism by other organizations in and out of Kansas.
"ALEC is rolling out this latest report on the eve of its meeting in Arizona with the 2016 election heating up to try to convince people that its prescription of tax cuts for the rich and austerity for the rest of us is sound economics," said Lisa Graves, Executive Director of the Center for Media and Democracy. "Those policies have failed in Wisconsin, and they are failing in Kansas."
In a CMD rebuttal to ALEC, it said "the result of (Kansas) Governor Brownback's ALEC-backed policies in the Sunflower State has been to widen the income inequality gap by shifting income to the state's wealthiest taxpayers and corporations, while suppressing wages and cutting services for the middle class, low-income children, and veterans. Brownback slashed education funding by $51 million last school year, forcing the early closure of Kansas schools, and asked for another $62.6 million in cuts this past July. Meanwhile, Kansas corporations walked away with $276.7 million in tax breaks and subsidies during Brownback's first term in office.
"The biggest benefits of Governor Brownback's 2012 tax program went to the top 1% while actually increasing taxes for the bottom 20%. Kansas now has the >9th most unfair tax system of any state in the country, according to the Institute on Taxation and Economic Policy. The poorest 20% of Kansans pay 11.1% of their income in state taxes, while the richest 1% pay just 3.6%.
"ALEC's supply-side policies are getting a cold reception among Kansas residents. A recent poll found that Governor Brownback is the most disliked governor in the country, with an approval rating of only 26%, and that three out of four people surveyed believed they were paying higher state taxes now than two years ago."
Median Household Income, 2014
|District of Columbia||$68,277|
U.S. Census Bureau, 2014 Current Population Survey, Annual Social and Economic Supplements.