at the end of 2007, “free-market economists” Stephen Moore and Arthur Laffer—most famous for the “Laffer Curve” illustrating the idea that higher tax rates can actually bring in less revenue—touted yet another ranking of the states based on economic strength. “States with a high propensity to tax and spend are finding their most wealthy and productive citizens moving across borders into areas that impose less of a financial burden,” they warn, so it’s not surprising that the top half of their Economic Competitive Index is dominated by states with low tax rates and minimum minimum wages, most of them in the South and West.
More striking is that old, cold Massachusetts ends up squarely in the middle, above every Northeastern state except Delaware and New Hampshire. What made us relatively appealing to Laffer and Moore? Their index is based on 16 variables, and the Bay State finished in the top 10 for three of them, thanks to our low sales tax, low reliance on “other” taxes (that is, other than income, sales, and property), and low worker’s compensation costs. We were also the 11th lowest in the number of public employees relative to our total population.
Where did we lose points? Our top marginal corporate tax rate was higher than in all but three states; our debt service as a percentage of total tax revenue was 12.8 percent, third-highest in the nation; and, of course, Laffer and Moore were not pleased by our relatively generous minimum wage law (higher than all but four states).
Laffer and Moore’s American Legislative Exchange Council also released a ranking of states by economic performance over the past decade, and here the Bay State was a less impressive 35th. Only three variables were considered, and we finished fifth on the basis of personal income growth but 43th on the basis of job growth and 44th on the measure of domestic in-migration (we actually lost 330,000 people to other states).
