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Why Florida, Other Free-Market-Friendly States Are Booming

May 27, 2015 - 12:30am

Florida and Republican-leaning states are booming, while traditionally Democratic states are getting left behind -- all because of  their economic policies.

Heritage Foundation economists Stephen Moore, Arthur B. Laffer and Joel Griffith teamed up on a study, “Why Red States Are Getting Richer and Blue States Poorer," looking at how the economy is managed in various states, including Florida.

The report covered issues ranging from personal income taxes, the corporate income tax rate, tax burdens, estate taxes, property taxes, sales taxes, state and local government debt, minimum wage, workers’ compensation costs, right-to-work issues and government pensions.

The report compares the nine states without a personal earned-income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire, and Tennessee) with the nine states with the highest income taxes (Kentucky, Minnesota, Maryland, Vermont, New Jersey, Oregon, Hawaii, New York, and California). Not surprisingly, states with no state income tax outperformed those with high state income taxes when it comes to population growth and job growth. States without income taxes had more than double the job growth than states with higher state income taxes

Businesses are more likely to set up operations in low-tax states and that pace is increasing, the report shows. From 1990 until June 2014, the job growth rate in states following conservative economic policies was off the charts with Florida seeing a 46 percent increase in job growth and Texas with 65 percent. That’s more than double the job growth of states like California (24 percent) and New York (9 percent).

The report also shows people and companies have been moving to right-to-work states in recent years. From 2002 to 2012, right-to-work states saw a jobs growth rate of 6.8 percent, more than three times that of the forced-union states which saw 1.9 percent growth.

The Heritage report also finds that states that follow conservative economic principles including low taxes, limited government interference in the private sector outperform states that reject those ideals. Texas and Florida, neither of which has a state income tax and which are both right-to-work states, have been implementing relatively pro-growth fiscal and regulatory policies. California and New York, on the other hand, have some of the highest state taxes in the nation and both states reject right-to-work.

According to the report, states without state income taxes and right-to-work policies also saw income increase by around 20 percent and experienced twice the population increase when compared with the highest-income-tax states.

Florida is clearly seeing some of the impact of this growth. Two of the top 10 fastest-growing metropolitan areas from 2010 to 2013 were Fort Myers and Orlando

The study finds states with higher tax rates, more liberal voting records, higher minimum wages, and more welfare benefits had less economic inequality than states on the other side of the policy spectrum.

“We found no evidence that these policies reduced income inequality,” Moore noted. “In some cases, we found statistically significant results in the other direction: liberal policy prescriptions are associated with more income inequality.”

“Too many politicians on the left still pretend that taxes, forced-union laws, indebtedness, and heavy regulation do not hurt their states' economies,” the study found. “This study shows that these policies matter a great deal."


Ed Dean, a senior editor with SSN whose talk-show can be heard on radio stations across Florida, can be reached at ed@sunshinestatenews.com. Follow him on Twitter: @eddeanradio.

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