Select Page

RICH STATES, POOR STATES

Delaware fares poorly in the latest release of the Laffer State Economic Competitiveness Index by the American Legislative Exchange Council in its report “Rich States, Poor States” (http://www.alec.org/AM/Template.cfm?Section=Rich_States_Poor_States).

The First State ranked 30th (1 best, 50 worst) in economic performance from 1998 to 2008. Delaware lagged in the growth of per capita income and was only average in employment growth.

On the 2010 Economic Outlook Ranking Delaware fell to 37th. Of the 15 policy variables that compose the ranking, Delaware was especially hurt by its high marginal top corporate income tax rate and personal income tax rate, debt service and labor regulations. The report also placed Delaware among the ten biggest losers in adjusting to the fiscal stress of the “Great Recession” because it placed greater emphasis on raising taxes (e.g., the top personal income tax rate, the cigarette tax and the gross receipts tax) than on cost cutting.

Among the major findings of the report there are two that stand out. First, states that spend less—especially on income transfer programs—and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that spend and tax more. Second, states without a personal income tax outperform states with a personal income tax across all major categories of performance, including output, employment, population, income and tax receipts. These are not uncommon findings, but they continually fail to resonate in Delaware.

Dr. John E. Stapleford, Director

Center for Economic Policy and Analysis