New York is one of the PIGS, along with California and Illinois, according to a new study.
New York’s economic outlook, a measurement of factors such as tax burdens, debt service and number of public employees, ranked 49th out of the 50 states, with California dead last, according to the latest edition of “Rich States, Poor States,” the American Legislative Exchange Council’s (ALEC) annual survey.
“The future is happening in the low-tax South and Great Plains, while high-tax California, New York and Illinois are increasingly looking like the Greece of North America,” the study said.
Put bluntly, the report says our taxes are too high: New York, along with New Jersey and seven other states, has too many spending and tax burdens, too many public employees and is not a right-to-work state.
The ALEC report also faulted New York state for raising the minimum wage from $7.25 to $9 an hour by 2016.
“Raising the minimum wage would only hurt New York’s small business, farms and nonprofits that are struggling to make their current payrolls and reduce job opportunities in this difficult economy,” according to Heather Briccetti, president of the Business Council of New York.
All these cost factors discourage the creation of new jobs, adds Arthur Laffer, a supply-side economist in the Reagan administration and one of the authors of the study.
In the decade from 2001 to 2011, the economy and populations of nine high-tax states grew at a much slower pace than they did in the nine states with no state income tax and lower spending, the study said.
For example, gross state product in the nine no-income-tax states was up 63.5 percent, while in the high-income-tax states the average was about 30 percent less, at 45.2 percent, according to the study.
What happened in the last recession, Laffer contends, is that some states resorted to raising tax rates as receipts declined along with the economy.
“And raising taxes, especially during trying economic conditions, will only make matters worse. An economy simply cannot tax itself into prosperity,” Laffer says.
But a New York state official familiar with the study said that some aspects of it were flawed because it didn’t list all the benefits of running a business here.
“For example, there’s nothing in the study that measures the quality of the work force here. We have an outstanding work force,” said Brian McMahon, executive director of the New York State Economic Development Council.