New 'Rich States, Poor States' Index Released

Michigan improves slightly

For years my colleagues and I have charted the rise and fall of Michigan’s economic fortunes using a number of different metrics. We did so because we care deeply about the well-being of Michigan citizens — and by extension — the whole Great Lake State.

We have looked at changes in state gross domestic product (the value of all goods and services produced within our borders), per capita personal income and interstate migration and population growth to name just three. We also employ indexes produced by other think tanks and scholars that rely on many more variables. One of those indexes was just updated and released last week. Our state’s rating was middling and could be improved with tax cuts.

The American Legislative Exchange Council produces a report each year called, “Rich States, Poor States: ALEC-Laffer Competitiveness Index.” This index measures 15 policy variables, from top marginal tax rates to public employees per 10,000 citizens and whether a state maintains a right-to-work law. States that appear higher in the rankings tend to do better economically than those who finish in the bottom tier.

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The annually updated report uses the data to rank states on their economic outlook. In the 2016 edition, which contains data through 2014, Michigan ranked 22nd, up slightly from 24th. That’s a better but still middling performance. Utah finished first in the index — its outlook is brightest — and New York finished last.

Michigan’s middle-of-the-pack performance is not a big surprise. In the last year or two, there have been no big policy changes in Lansing that would necessitate a big move upward. Also, other indexes and rankings we have tracked have also placed Michigan in the great average of American states. The Tax Foundation of Washington D.C. ranks Michigan’s state and local tax burden 25th among 50 through 2012. Similarly, in the index “Economic Freedom of North America,” Michigan ranks 27th among 50 states through 2013.

There is much that could be done to raise our ranking in the ALEC index (among others) going forward. A reduction in taxes — or perhaps the outright elimination — of the state’s corporate or personal income tax is just one example.

Great strides have been made in recent years to reform Michigan’s fiscal policy and regulatory landscape, but much more can and should be done.

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