The American Legislative Exchange Council just released its 8th annual Rich State, Poor State index. This year, ALEC calculated that Utah, North Dakota, Indiana, North Carolina and Arizona are the five states with the most favorable business climate while the five worst are New York, Vermont, Minnesota, Connecticut and New Jersey.
To arrive to these conclusions, ALEC specialists weighed 15 different variables and showed how they boost or hinder the state’s economy. For example, states with a more progressive income tax are more likely to penalize effort and decreases economic activity. Likewise, a state with a higher per-capita public work force hinders the economy since it increases the bureaucracy, public spending and decreases economic activity.
This year, like every previous year, Utah is seen as the state with the best economic outlook. Despite a relatively high tax burden increase in 2013 and 2014, its flat income tax penalizes work to a lesser extent since higher incomes don’t pay a higher percentage of taxes. Utah also has the third best non-farm payroll increase in the country and the fifth best growth in GDP of the past 10 years, above the national average.
On the other side of the ranking, New York is dead last for the fifth time in eight years. This shouldn’t be a surprise, considering its high income tax for individuals and corporations. Its public work force is 22 percent larger than Utah’s, whereas the total tax burden is 32 percent heavier. Finally, despite average GDP and non-farm payroll increase, the Empire State continues to see its population drop every single year for the past 10 years, the worst performance among all 50 states.