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For the second consecutive year, Colorado took a tumble in the national rankings for economic outlook. A gradual weakening of taxpayer protections, combined with pro-growth gains in other states, have pushed Colorado from near the top of the heap to the middle. No state has slipped further faster.
The findings come from today’s release of the 7th annual edition of Rich States, Poor States. The publication by the American Legislative Exchange Council (ALEC) — the nation’s largest nonpartisan membership organization of individual state legislators — employs 15 reliable economic policy metrics to determine the rankings.
Rich States, Poor States finds a strong correlation between strong pro-growth economic policies and rates of in-migration. In other words, people tend to move into the states that rank highly on the index.
“It really shows the states that value competitiveness and economic freedom, the states that value lower taxes,” said Jonathan Williams, director of ALEC’s Center for State Fiscal Reform and co-author of the report. The other authors are economist Dr. Arthur B. Laffer, of “Laffer Curve” fame, and Heritage Foundation chief economist Stephen Moore.
Colorado’s economic outlook fell from 16th in 2013 to 22nd in the latest edition. Only Florida dropped further since last year. The two-year trend from an 8th place standing marks a precipitous decline for Colorado, as the state has slipped 14 places in that time span. As recently as 2010, the Centennial State was second in the nation.
Williams attributes the decline to two factors. First, he points to a legal and political erosion of the Taxpayer’s Bill of Rights, a 1992 voter-approved constitutional amendment designed to limit the growth of state and local government. But he also notes a tailwind occurring in many places beyond Colorado’s borders.
“You haven’t seen massive tax increases every year, but a number of other states are moving the other direction,” Williams said.
Three states in particular have made a significant one-year climb up the Rich States, Poor States economic outlook ladder. North Carolina leaped from 22nd to 6th; Indiana ascended from 14th to 3rd; and Michigan moved up from 20th to 12th.
North Carolina reduced both corporate and personal income tax rates, while changing the tax structure from a graduated to a flat system and eliminating the “death tax.” Indiana similarly repealed its inheritance tax. Both Indiana and Michigan reformed business personal property taxes.
Falling to 22nd drops Colorado behind many of its competing neighbors. Utah retains its historic number one ranking, while Arizona and Wyoming both stand in the top 10. Texas, Kansas, and Oklahoma also all rate ahead of Colorado. Only Nebraska (35th) and New Mexico (37th) lag in pro-growth economic policies.
According to the report’s co-author, the real-world implications of the policies assessed make the rankings worthy of lawmakers’ attention. It especially can serve as a clarion call for a state following Colorado’s trend line to change its fiscal policy direction.
“It connects the dots for people,” said Williams. “It’s not just conservative economic theory. It’s about states getting things right and reaping the rewards.”
Tags: ALEC, Arizona, Colorado, economic freedom, Indiana, Jonathan Williams, Laffer Curve, Michigan, North Carolina, policies, pro-growth, Stephen Moore, tax policy, Taxpayer’s Bill of Rights, Utah, Wyoming
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