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New report details how bad economic policies reduce prosperity for states

New report details how bad economic policies reduce prosperity for states

Oct 23, 2023 by AFP

Benjamin Glasner at the Economic Innovation Group recently released a report detailing economic flows between different states during the Covid-19 pandemic.

Using IRS data from 2020 and 2021, stifling high-tax, high-regulation states such as California and New York saw massive economic outflows to low-tax, low-regulation states such as Florida, Texas, Nevada, and Arizona.

Which states saw the greatest income losses during Covid?

According to the report, the states with the greatest income losses were:

  • California (net loss of $29.1 billion)
  • New York (net loss of $24.5 billion)
  • Illinois (net loss of $10.9 billion)
  • Massachusetts (net loss of $4.3 billion)
  • and New Jersey (net loss of $3.8 billion)

Rounding out the top ten in net economic losses were Ohio, Pennsylvania, Maryland, Virginia, and Washington, D.C.

Which states saw the greatest net economic gains during Covid?

The states with the greatest net economic gains were:

  • Florida (net inflow of $39.2 billion)
  • Texas (net gain of $10.9 billion)
  • Nevada and North Carolina (net gains of $4.6 billion each)
  • and Arizona (net inflow of $4.4 billion)

Rounding out the top ten in net income gains were South Carolina, Tennessee, Idaho, Colorado, and Utah.

Where did the economic gains come from?

Most of these economic gains came from high-tax states.

Florida saw $9.8 billion in net economic inflow from New York, $3.9 billion net from Illinois, $3.7 billion net from New Jersey, and $3.4 billion from California.

Most of Texas’ net inflow came from California ($5.6 billion), New York ($1.1 billion), and Illinois ($1 billion).

What separates high inflow states from those with high outflow? 

What separates the high inflow states from the high outflow states is good, prosperity-driving economic policies.

In contrast to California, Illinois, New York and New Jersey’s high tax rates, Florida, Texas, Nevada, and Tennessee do not levy personal income taxes. North Carolina, Arizona, South Carolina, Idaho, and Utah have all reduced tax rates in recent years.

All the states with the top 10 net economic gains except Colorado are Right-to-Work states, while, of the states with the top net economic losses, only Virginia is Right-to-Work.

Idaho, Nevada, Arizona, and South Carolina are among the least-regulated states in the country, while California, New York, Ohio, and Illinois are the states with the most regulations.

Economic policies that increase freedom and limit government not only lead to greater individual prosperity, but also lead to greater state economic prosperity.

Read Glazer’s full report to learn more about the negative affect bad policies have on prosperity.