The wrong top ten updated

Nearly a year ago I did what turned out to be one of my most popular posts which looked at how states ranked highly by the Tax Foundation did in terms of economic performance. Its time for an update.

Then, as today, being highly ranked in business climate rankings seems increasingly to be the goal/measuring stick of economic policy makers and too many pundits. Rather than having a good economy. The problem is Michiganders can’t pay their bills or save for their kids education or their retirement with business climate rankings. What matters to them is do they have a job and how much it pays.

Lets look at one of the most respected business climate rankings to see if doing well in the ranking translates into a better economy for a state’s residents. Below are states ranked from 1-10 in the Tax Foundation’s 2014 State Business Tax Climate Index and their ranking in per capita income in 2012. Per capita income being the best measure of the standard of living of a state’s residents. (Governor Snyder agrees the Tax Foundation’s rankings matter. They are featured in an op ed he wrote last year for Forbes.)

  • Wyoming, 7th
  • South Dakota, 18th
  • Nevada, 37th
  • Alaska, 10th
  • Florida, 27th
  • Washington,12th
  • Montana, 36th
  • New Hampshire, 9th
  • Utah, 46th
  • Indiana, 39th

Below are the states ranked 41-50 (those judged to have the worse business climate) in the Tax Foundation’s 2014 State Business Tax Climate Index and their ranking in per capita income in 2012.

  • Maryland, 5th
  • Connecticut, 1st
  • Wisconsin, 26th
  • North Carolina, 38th
  • Vermont, 21st
  • Rhode Island, 14th
  • Minnesota, 11th
  • California, 15th
  • New Jersey, 3rd
  • New York, 4th

The average ranking in per capita income for the ten states with the best business climate ranking is 24.1 for the ten worst 13.8. Given that the ten worst business climate states on average have a higher standard of living than the best ten, it is real hard to make a case that being ranked a top ten business climate state is a reliable path to a higher standard of living for Michiganders.

At the very least, it calls into question whether the lowering business cost agenda––that has been the almost exclusive priority of Lansing policy makers the past three years––is the right agenda for returning Michigan to a high prosperity state.

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