The American Legislative Exchange Council just released its sixth edition of Rich States, Poor States by Arthur Laffer, Stephen Moore, and Jonathan Williams. For those not familiar with Rich States, Poor States, the piece evaluates and compares the economic prosperity and competitiveness of the fifty United States to determine which state economic policies most promote economic success.
Laffer and his colleagues begin by laying out their “Ten Golden Rules of Effective Taxation.” These include policies the researchers argue to be most effective in increasing revenue generation, such as decreasing taxation on desirable activities as a means of encouraging their consumption. Lowering the tax rate while broadening the base is productive because “[l]ower marginal tax rates reduce the tax wedge and lead to an expansion in the production base and improved resource allocation.” Though many of the policies evaluated vary by state, the creation of economic growth remains constant from these practices.
Texas scores well on economic prosperity and competitiveness due to its statewide policies. This year, the state improved its outcomes from previous years by ranking first in economic performance and ranking twelfth in economic outlook. Nevertheless, the authors suggest room for improvement by modifying the state’s margin tax, which is a unique hybrid between a gross receipts tax and a corporate income tax. Governor Perry specifically recommends a tax cut for state businesses, which the authors’ believe would result in “Texas unlocking even more economic potential.” Overall, the continued growth and success of the Texas economy rests in the hands of state lawmakers.