The Habits of Highly Successful States

September 23, 2010

The economy is coming back. But not the way the White House thinks.

USA TODAY crunched federal figures on personal income, and concluded, “Since the recession officially ended in June 2009, a group of about 10 states that have outperformed the nation almost continuously for 25 or more years again is generating new income at a faster pace than the rest of the nation.”

The names are familiar: Idaho, Utah, the Dakotas, Texas, Tennessee, North Carolina. They’ve been all-stars for some time, and in the most pathetic economic “recovery” in decades, are among the least-troubled states. They’re also places where the Big Government “solutions” Obamabots so adore aren’t very welcome.

The losers? No surprises. New York, New Jersey, Connecticut, Rhode Island, Michigan, Illinois, Ohio -- deep-blue, union-run domains where high taxes and runaway regulations scare entrepreneurs and send residents fleeing.

Personal income is, of course, an imperfect measure of a state’s performance. But other metrics, such as business starts, job growth, and immigration/emigration comparisons, back up a conclusion that is obvious to many: Successful states keep taxes low, stay out of the way of wealth-creators, and call their legislatures into session as infrequently as possible.

According to the U.S. Bureau of Labor Statistics, between July 1990 and July 2010, Nevada (78 percent), Utah (66 percent), Arizona (62 percent), Idaho (58 percent), and Texas (46 percent) enjoyed the greatest job growth. In the Rust Belt and the Northeast, states were lucky to achieve single-digit gains. (Michigan and Connecticut actually lost jobs during the period.)

To public-sector apologists, the shift to the southwest is solely about weather. Old folks -- the World War II Generation, the Silent Generation, and now Baby Boomers -- hate to shovel snow, so they follow the sun.

True, but only to a point. It doesn’t explain Idaho, a pretty snowy place that is rapidly accumulating ex-Californians. Nor New Hampshire. It has a Dyson-like ability to suck jobs and capital from adjacent states. Since 1990, employment has boomed by almost 30 percent, nearly triple the rate of its neighbor to the south, a place that sends many refugees the Granite State’s way.

“It’s fine whenever Massachusetts wants to raise their taxes, because it always benefits us up here,” Governor John Lynch told the Boston Herald last month. “There’s a reason why our economy is doing better than many other states.”

New Hampshire’s unique attractiveness stems from its lack of both sales and wage/salary taxes. Seven states don’t tax income sources of any kind, “earned” or “unearned.” An April examination by The Christian Science Monitor found that of the states that lack broad-based income taxes, “all but one -- Alaska -- saw more people migrating in than out (within the 50 states) during the period from 2000 to 2008, according to research by the Empire Center for New York State Policy.”

Connecticut was the last state to adopt an income tax, and recently compounded its blunder with a “millionaire’s tax.” In contrast, this summer, Rhode Island cut its top income-tax rate from 9.9 percent to 5.99 percent.

Another commonality for high-achieving states is the adoption of right-to-work laws. These statutes permit workers to escape paying either full union dues or the “agency fee” imposed on dissenters. The effect on employees is obvious: More take-home pay. But the public-policy benefits are vast. Without their coercive power to raise funds, unions’ political machines are less able to elect friendly politicians who are committed to securing passage of laws that drive a state’s cost of doing business higher.

Okay, okay, admit a few holdouts. We’ll stipulate to the success of low-tax, labor-freedom states. But have you seen what people earn in those places? Horrible, Third World wages!

Incomes are lower in red states -- that’s not in dispute. But so are prices. Housing, energy, food, healthcare, and other essentials cost far less in Boise, Amarillo, and Huntsville than they do in San Jose, Chicago, and New Haven. If they don’t, why are so many relocators willing to reduce their standard of living?

Bureaucrats, legislative careerists, and taxpayer-funded “economists” say a state’s path to prosperity is “investing” in buses and trains, plowing subsides into universal preschool, and showering fashionable industries with perks. High taxes don’t matter, they tell us, and unions play a mostly positive role.

Data suggest a different prescription. As long as Americans continue to vote with their residencies, states with smart fiscal and economic policies will prosper. Mired in denial, their tax-hiking, big-spending, central-planning counterparts will continue to wither.

D. Dowd Muska ( writes about government, economics, and technology. He lives in Broad Brook, Connecticut.

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