Why do we want to be like those states?
In my last post we looked at evidence that the most prosperous non-energy states were those with the highest college attainment, not the lowest taxes. In this post I want to look at the states the tax cutters in Lansing are telling us we need to emulate.
The argument of many advocating for an elimination of the state income tax was Texas and Florida don’t have an income tax and they are strong economy states. Think again! Texas is 24th in per capita income and Florida is 28th. Yes slightly better than Michigan’s 32nd. But not close to the Great Lakes’ best Minnesota at 14th or #1 Connecticut. Per capita income in Texas is nearly $22,000 lower than Connecticut. For Florida its more than $24,000.
Yes Texas and Florida are low tax states, they rank 14th and 4th overall in the latest Tax Foundation State Business Climate Index. Connecticut ranks 43rd. Connecticut has a graduated income tax with a top marginal rate of 6.99 percent. Minnesota––which is ranked 46th by the Tax Foundation––also has a graduated income tax with a top rate of nine percent. So much for lower taxes leading to higher prosperity.
(Washington is the one top 15 per capita income state that does not have a state income tax. But they also are 11th in the proportion of adults with a four-year degree or more.)
As we saw in my last post what aligns with high per capita income is the proportion of adults with a four-year degree or more. On that measure Connecticut is 4th, Florida is 28th and Texas is 30th. Michigan is 32nd in per capita income, 32nd in the proportion of adults with a four-year degree or more and 12th in the Tax Foundation rankings.
Let’s move on to the case Business Leaders for Michigan is making for big new tax breaks for business making investments in Michigan. They claim we aren’t competitive with Ohio, Indiana, South Carolina and Kentucky. Which begs the question “why do we want to compete with them?”
Ohio is 30th in per capita income, Indiana is 36th, Kentucky is 43rd and South Carolina is 45th. It will come as no surprise that all four are low college attainment states. Ohio ranks 37th, Indiana 42nd, Kentucky 46th and South Carolina 36th.
To BLM’s credit one of their goals for Michigan is becoming a top ten state in per capita income. But its hard to figure out how we are going to get there trying to adopt the policies of states that are towards the bottom in per capita income. For years we have said you can’t get Minnesota’s economy with Mississippi’s policies. Substitute Ohio, Indiana, Kentucky and South Carolina for Mississippi and you still won’t get Minnesota’s economy.
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I just read an article in this week’s or possibly last week’s Bloomberg Business Week. It was about the low pay and horrible unsafe working conditions in many autoparts factories in the American south, including some of the states you mentioned for low taxes. I think we always have manufacturing in Michigan, even though employment in manufacturing will continue to decrease as a percent of all employment. We certainly need to maintain good safety standards even if it does cost more money.
It’s a real sobering article. And I agree with your comments 100%. What made manufacturing so appealing to Michigan was that it was high paid and over time relatively safer. Going to low paid and unsafe factory work is not progress. That is not the kind of work Michigan should want.