The American Legislative Exchange Council (ALEC) recently released its annual “Rich States, Poor States” report. This report analyzes the 50 United States on a variety of dimensions deemed to reflect relative economic competitiveness, and produces an Economic Outlook ranking for the states.
The criteria they use are dominated by tax variables, and states with lower and/or flat taxes score higher in the rankings. The criteria also include measures of state government debt burden, the size of government in the economy, the implications of state liability and labor laws for business-friendliness.
Truth in Accounting includes the annual results from ALEC’s ranking every year from 2008 to 2019 in our State Data Lab database. We’ve noted for years that state rankings on ALEC’s scorecard tend to line up with our rankings of state financial conditions, as measured in our Taxpayer Burden calculation.
The chart below shows the rankings of 10 states on Truth in Accounting’s Taxpayer Burden measure of state financial conditions. The 10 states include the five states that rank highest on ALEC’s economic rankings (Utah, Idaho, North Dakota, Nevada, and Indiana), and the five states that rank lowest (New York, Vermont, Illinois, California, and New Jersey).
You can see a clear distinction between these two groups of states as they rank on financial conditions. States with brighter economic outlooks as identified by ALEC also tend to be states with state governments that have managed their finances responsibly, and not shifted the costs of past government spending to future taxpayers.
States with poor economic outlooks have done the opposite.