2012 ALEC-Laffer Report Strikes Familiar Theme

The just-released 5th edition of Rich States, Poor States, the American Legislative Exchange Council's (ALEC) report on economic competitiveness of the states, reaches familiar conclusions shadowing those set forth in preceding editions: How the 50 states, described in the report as "laboratories of democracy," measure up in the ongoing pursuit of economic "wellness" is largely a function of lawmakers' doctrinal beliefs about social policy prevailing in the respective statehouses.  

More to the point, and consistent with the organization's findings in prior years, politically "red" states fare well - and "blue" states poorly -  in this year's ALEC-Laffer "Economic Outlook Rankings": Utah leads the pack, Illinois is 48th, and the cellar's familiar occupant is New York.  The report's "Economic Performance Rankings" display similar results. In general, the competitiveness totem pole reflects the theory that ALEC proponents love to hear: Reducing tax rates and extending tax-related incentives are the best - and only - path to drive a state's economic success.

As usual, this year's ALEC-Laffer report sets forth basic precepts that resonate with social and political conservatives - but not with those who are not: In broad terms, ALEC-Laffer submits that economic competitiveness is a function of each state's posture in comparison to all other states with regard to 15 social policy variables. Most of these variables are tax-centric:

  • Marginal personal income tax rate
  • Marginal corporate income tax rate
  • Personal income tax progressivity
  • Property tax burden
  • Sales tax burden
  • Remaining tax burden
  • Estate / Inheritance tax
  • Recently legislated tax changes
  • Debt service as a share of tax revenue

Love it or hate it, ALEC-Laffer purports to present objective data to back up its view that states afflicted with unfavorable ratings in the bulleted tax-centric indicia (and the other non-tax variables) are behind the 8-ball in job-creation, migration of citizens and employers to competing states, and other areas. ALEC-Laffer posits that these states are bound to remain uncompetitive, barring profound ideological changes in their statehouses.

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