April 26, 2018 Reading Time: 2 minutes
Salt Lake City and Provo exemplify the positive effects of Utah’s tax and labor policies. (Elizabeth Haslam)

Lawmakers, more than ever, have at their disposal plenty of comprehensible studies and metrics to guide them in voting on or drafting legislation. Think tanks serve as a much-needed link between researchers and politicians.

One of the most widely used economic reports in the United States for policymakers is Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index by the American Legislative Exchange Council. Already in its 11th edition, the document examines both each state’s economic policies and its performance. The consistent conclusion will come as no surprise to readers of this blog: less government expenditure in transfer programs and lower tax rates increase economic growth.

The index combines two rankings. On the one hand, the Economic Performance Ranking looks at the states’ gross domestic product, absolute domestic migration, and non-farm payroll employment. On the other, the Economic Outlook Ranking examines 15 key policy issues ranging from taxes to labor regulations.

Rich States, Poor States also offers a useful online tool to compare states and tweak policies to achieve a better score. If one tries with lower tax rates and constraints, the state’s placement on the ranking improves.

This report shows what makes Utah so economically successful and a repeat number-one position holder in the final index—evident by its cumulative GDP growth of 48.3 percent from 2006 to 2016. Utah has the second-lowest unemployment rate in the United States, and WalletHub ranked it as the nation’s 11th-safest state. Moreover, citizens of Provo and Salt Lake City stand out as among the wealthiest and most educated in the entire nation.

“The facts remain clear that pro-growth policies are working and there is a clear trend in favor of market-oriented reforms,” the report’s authors argue. Twenty-one states that have implemented such policies have experienced significant hikes during the ranking’s decade of existence, while 29 states that keep enforcing burdensome regulations have fallen. 

The worst record goes to South Carolina, which has dropped 13 positions, and no other state has improved as much as Ohio, which has climbed 26 positions.

Rich States, Poor States continues to provide solid evidence that getting the government out of the economy is the best way to promote growth. As Utah’s Senate President Wayne Niederhauser puts it: “There is no question that states like Utah are reaping the benefits of sound fiscal policy. It is clear that limited regulation, low taxes, low debt, and balanced budgets create the best environment for business, investment, and jobs.”

Lawmakers only have themselves to blame if they don’t heed the advice.

Paz Gómez

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