by Jonathan Williams
For the past 14 years, I’ve had the privilege of authoring the annual ALEC publication, Rich States, Poor States, alongside economists Dr. Arthur Laffer and Stephen Moore. In each edition of our report, we rank the economic outlook of states, measuring their relative economic competitiveness based on influential policies, such as taxes, regulations, and labor policies. In each edition of our study, Utah has earned the top economic outlook ranking in America.
These rankings are far more than theoretical. The newly minted U.S. Census Bureau report on state-by-state population changes revealed that Utah was the fastest growing state in America since the census of 2010, with a staggering growth rate of 18.4 percent. Americans are voting with their feet in favor of states like Utah that value lower tax burdens and more economic freedom.
As I travel across the 50 states and give presentations to legislators, taxpayer groups, and the business community, inevitably the question will be asked: How has Utah been able to accomplish this remarkable achievement of 14 consecutive years at number one?
The answer is really two-fold. Major free-market and a steady and long history of enacting pro-taxpayer policy reforms have been essential to the success of Utah. Additionally, the continued commitment by leading policymakers to study Utah’s economic resume and stay ahead of the curve has also been crucial to Utah’s longstanding success.
As Utah Senate President and 2021 ALEC National Chairman, Stuart Adams said, “ranking as the most competitive state in the nation this many years in a row does not just happen by chance. Years of planning and preparation placed our state in a strong position to recover and succeed even in tough years like 2020…” President Adams is absolutely correct. Good policy outcomes do not happen by chance.
Just a few of Utah’s impressive policy achievements include pension reforms that made important steps to address unfunded liabilities, the Truth in Taxation law that has added needed transparency and accountability to property taxes, and the “Financial Ready Utah” package of legislation that analyzes federal funds and works to protect Utah taxpayers from many of the excessive risks and costly strings attached to the funding.
While these reforms have worked to keep Utah at the top in the Rich States, Poor States economic outlook rankings, other states are also making impressive strides. For instance, Florida, a state without a personal income tax, now ranks 2nd best in economic outlook. North Carolina has dramatically improved and now has the 5th best outlook, after passing comprehensive tax reform with a business income tax rate of 2.5%. Additionally, policymakers in Arizona just approved a historic state budget that includes a net tax cut of $1.9 billion, reduces personal income tax rates to a flat 2.5% for most Arizonans, and caps the rate paid by high earners at 4.5%.
In 2021 alone, more than 10 states have adopted income tax relief. With all of these free-market changes happening in the states, how can Utah stay ahead?
While Utah’s personal income tax is relatively low and has a single rate of 4.95% – thanks to previous reforms – the region is extremely competitive in this key variable for economic competitiveness. Of course, Wyoming, Nevada, Texas, Washington and South Dakota all avoid personal income taxes. Recently, Colorado Governor Jared Polis, a Democrat, indicated his support for eliminating Colorado’s income tax as a way to enhance economic growth.
All taxes matter for economic competitiveness. However, based on our research, income taxes matter the most. When it comes to the state income tax rates, Utah could certainly help ensure it stays ahead of the curve with smart income tax relief ideas.
At ALEC, we stand ready to provide our non-partisan research and analysis to help Utah and states across America remain competitive – even with the challenging economic crosswinds coming from the federal level in Washington, DC.
Jonathan Williams is the executive vice president of policy and chief economist at the American Legislative Exchange Council. Follow him on Twitter @taxeconomist