The (New/Tax) War Between the States

And this time, the South (and the West) are winning...

From the WSJ, an op-ed piece by Arthur Laffer (of Laffer Curve fame) and Stephen Moore (from Club for Growth)...

A record eight million Americans moved from one state to another last year. Where is everyone going, and why? The answer has little to do with climate: California has arguably the nicest climate of any state in the nation -- yet in this decade more Americans have left the Golden State than entered it.

Migration patterns instead reveal which states have the most dynamic and desirable economies, and which are "has-been" states. The winners in this contest for the most valuable resource on the globe -- human capital -- are generally the states with the lowest tax, spending and regulatory burdens. The biggest losers are almost all congregated in the Northeast and Midwest. Liberals contend that tax rates, regulations, forced union laws and runaway government spending don't matter when it comes to creating jobs, high incomes and a higher quality of life. People tell us otherwise by voting with their feet.

Liberals generally claim to embrace logic, reason, and evidence. One would hope they'd do the same here...

The American Legislative Exchange Council has just released a study we've done that presents a 2007 Economic Competitiveness Rating of the 50 states, based on 16 economic policy variables, including taxes, regulation, right to work, the legal system, educational freedom and government debt. Over the past decade, the 10 states with the highest taxes and spending, and the most intrusive regulations, have half the population and job growth, and one-third slower growth in incomes, than the 10 most economically free states....

Of all the policy variables we examined, two stand out as perhaps the most important in attracting jobs and capital. The first is the income tax rate. States with the highest income tax rates -- California and New York, for example -- are significantly outperformed by the nine states with no income tax, such as Texas and Florida. As a study from the Atlanta Federal Reserve Board put it: "Relative marginal tax rates have a statistically significant negative relationship with relative state growth."

The other factor for attracting jobs and capital is right-to-work laws. States that permit workers to be compelled to join unions have much lower rates of employment growth than states that don't. Many companies say they will not even consider locating a factory in a state that does not have a right-to-work law.

Our study also finds that states with antigrowth tax and spending policies don't just lose people. Noncompetitive states like New York, Michigan, Pennsylvania, Illinois and New Jersey are plagued by falling housing values, a shrinking tax base, business outmigration, capital flight and high unemployment rates, and less money for schools, roads and aging infrastructure. These factors of decline hurt the poor the most.

Liberals often claim that their policies help the working poor and those in the middle class. That's rarely the case, in practice-- as evidenced (again) here...

Finally, Laffer and Moore's punchlines...

Auto and other manufacturing jobs are still being created in America -- but in Alabama, North Carolina and even Mississippi. It has to be infuriating to Northeasterners to learn that people and businesses are "trading up" by moving out of their region to the likes of Georgia and Alabama. But they are.

The states losing population are in effect suffering from a slow-motion version of the economic sclerosis that paralyzed much of Europe in the 1980s and '90s, particularly France and Germany with their massive welfare systems. At least the European socialist nations are finally starting to change their taxing and spending ways to win back jobs.

No such luck in this country. Five of the states near the bottom of our competitiveness ratings -- Illinois, Maryland, Michigan, New Jersey and Wisconsin -- have enacted major tax increases in the last two years. Maryland and Michigan just raised business and income taxes on upper-income earners, while arguing that raising the cost of doing business will attract more businesses. More likely it will induce companies to stay away, and people to move out.