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Economic Rankings Provide Motivation to States

Florida leads Georgia in the rankings for 2022. So does (gulp) Tennessee.

Relax, fellow Bulldogs. I’m not talking about college football, nor do I mean the Gators or the Volunteers. Instead, I refer to projections for how each state’s economy is expected to perform in the coming years.
These rankings are part of an annual publication called “Rich States, Poor States.” In it, the American Legislative Exchange Council evaluates each state’s policies on a range of factors – mostly related to taxes, but also including public debt, labor laws and more.

The latest edition, released earlier this month, rates Georgia 15th. That doesn’t sound too bad, until you consider the states around us: North Carolina ranks second, Florida eighth and Tennessee 13th. We live in a tough neighborhood when it comes to economic competitiveness.

Our state also trails a number of states to our west – Utah (which is first for an amazing 15th straight year), Arizona (third), Oklahoma (fourth), Idaho (fifth), Nevada (sixth), North Dakota (ninth), Wyoming (10th), Texas (11th) and South Dakota (12th) – plus Indiana (seventh) and Wisconsin (14th) in the Midwest.
The publication also looks at past performance – economic growth, net domestic migration and job creation over the past decade – and rates Georgia ninth. By that metric we trail, in descending order: Arizona, Utah, Florida, Idaho, Washington, Colorado, South Carolina and Texas.

You’ll notice a good bit of overlap between those lists. Where there are exceptions, they tend to be states that have fallen in the rankings over the years. Colorado, for example, routinely landed in the top 10 for economic outlook from 2009 to 2012, portending future prosperity. It has fallen fairly steadily ever since, indicating a possible future decline.

No rating system is perfect, but the beauty of “Rich States, Poor States” is its recognition that humans are rational beings who respond to incentives. Make a place more attractive, and it’s likely to attract people, jobs and investment.

That’s why the decisions made by Georgia’s policymakers, including the recent bill to flatten and lower the personal income tax matter.

“Rich States, Poor States” is particularly impressed with Georgia’s labor laws, rating us highly for the labor-market flexibility that comes with having right-to-work laws and a relatively low minimum wage. That doesn’t mean Georgians can’t earn a good living. But it does mean employers can adjust to disruptions and aren’t locked into expensive contracts with unions or government-mandated wages.

The rankings are less favorable toward Georgia’s existing tax code, slotting us in the middle on most metrics. The bill that passed earlier this month should give us a boost once it’s fully implemented. The (eventual) flat rate of 4.99%, down from a high of 5.75% currently, would bump Georgia up by one spot if it were in place today. Going to a flat tax would bump it up one or two more.

Of course, other states aren’t standing pat. Statehouses across the country have been busy cutting tax rates in response to huge surpluses. Highly competitive states such as North Carolina continue to make progress, and states that have lagged Georgia, such as Iowa and Mississippi, are taking bold steps to catch up. This is no time to rest on our laurels.

The revenue surges won’t last forever, but so far they show few signs of slowing: Through the first nine months of the current budget year, Georgia is running $3.59 billion, or 18.9%, ahead of last year, which itself saw a surplus surpassing $3 billion. Along with responsible budgeting, paring back tax rates can ensure state spending doesn’t grow out of control during these boom times.

The greatest value of these kinds of rankings may lie not in the comparisons themselves, but in the motivation they provide to improve. Georgia will be better off if our policies improve, even if our ranking doesn’t.

Of course, as we Bulldog fans now can finally confirm, it sure does feel great to be No. 1.