In a special edition of the Across the States podcast, ALEC Senior Vice President Lee Schalk and ALEC President Jonathan Williams discussed the 18th edition of Rich States, Poor States: The ALEC-Laffer State Economic Competitiveness Index. This annual report has become a key resource for state lawmakers and policy analysts, offering insights into state-level economic competitiveness.
Utah has maintained its top ranking for economic outlook for all 18 years, thanks to consistent pro-growth policies. Tennessee surged to second place, benefiting from its no-income-tax status and regulatory reforms. Indiana, North Carolina, and North Dakota rounded out the top five, showcasing their fiscal discipline and strategic reforms.
On the other end of the spectrum, states like New York, Vermont, New Jersey, California, and Illinois ranked lowest due to high taxes, heavy regulations, and significant outmigration. California, for instance, has lost 2.2 million residents since 2014, highlighting the consequences of its economic policies.
The report also highlighted turnaround stories, including Arkansas, Louisiana, and West Virginia, which climbed the rankings due to tax cuts and regulatory relief. Looking ahead, states like Oklahoma, Mississippi, and Kansas are poised to improve their standings following recent tax reforms.
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Rich States Poor States Turns Eighteen: Across the States Special Edition – American Legislative Exchange Council
On a special edition of the Across the States podcast, ALEC Senior Vice President Lee Schalk and ALEC President and Chief Economist Jonathan Williams sat down to discuss the newest edition of Rich States, Poor States: The ALEC-Laffer State Economic Competitiveness Index. Now in its 18th year, the report has become one of the most anticipated annual releases for state lawmakers and policy watchers alike — and this year’s rankings didn’t disappoint. n n“This report’s finally old enough to vote,” Lee joked at the top of the show. But the conversation soon turned to the details, the rise and fall, and the state-level success stories that are reshaping the American economy from the ground up. n nUtah’s Reign Continues n nThe state of Utah has claimed the top spot in economic outlook for all 18 years of the report’s publication. This isn’t by chance. The Beehive State consistently earns its place by pursuing pro-growth policies and refusing to rest on its laurels. In fact, had the state simply coasted after its first #1 ranking in 2007, it would now sit at #23. Instead, Utah has pushed ahead with policy reforms to maintain an economic advantage. n nThe Index That Changed the Game n nRich States, Poor States was born from a collaboration between ALEC, Dr. Arthur Laffer, and Stephen Moore. The goal was to give state lawmakers a clear, comparative framework to evaluate economic competitiveness across states. The report measures 15 key policy variables—from income and corporate tax rates to right-to-work laws and estate taxes—all weighted equally and chosen for one reason: they are policy levers state lawmakers directly control. n nSince its launch in 2007, the report has become a go-to resource for reform-minded legislators, providing a roadmap for how to foster economic growth and attract residents and job creators. “People aren’t trees,” Williams noted, quoting former Virginia Governor George Allen. “They move in response to incentives.” In other words, Americans vote with their feet. n nTop Five States for Economic Outlook n nThis year’s top five include: n n1. Utah – #1 for the 18th year straight n n2. Tennessee – a no income tax state that surged ten spots from last year n n3. Indiana – a quiet, consistent champion of conservative fiscal policy n n4. North Carolina – a remarkable turnaround story, jumping from 26th in previous years n n5. North Dakota – holding its own in a region filled with tax-competitive neighbors n nTennessee in particular made waves, jumping to #2 thanks to being a no-income-tax state and aggressively cutting red tape. n n“It sent a little shockwave through Utah,” Williams joked. “They saw Tennessee climbing and realized they need to keep their foot on the gas.” n nMeanwhile, North Carolina continues to be a case study in reform success. A little more than a decade ago, they were stuck in the mid-20s. Now? Top five — thanks to strategic tax cuts and long-term policy planning. n n“In a region like the Southeast, if you’re not aggressive on tax policy, you’re going to get eaten alive,” said Schalk. n nBottom Five States Struggle with Outmigration and Deficits n nAt the other end of the spectrum: n n50. New York n n49. Vermont n n48. New Jersey n n47. California n n46. Illinois n nThese are states where the approach to economics can be summed up with the old Reagan line: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.” n nThese states have consistently chosen high taxes, burdensome regulations, and heavy spending—and they’re paying the price. New York and California have lost hundreds of thousands of residents on net. California alone has lost 2.2 million residents since 2014 and now sports the nation’s highest marginal income tax rate at 14.4%. n nAs Williams put it, “They prove the Laffer Curve in real time: raise taxes too much, and you don’t get more revenue—you get fewer taxpayers.” n nThe Comeback Stories: Arkansas, Louisiana, and West Virginia n nNot every success story is about long-term dominance. Some are about bold turnarounds: n nArkansas jumped to 10th place—the state’s best ranking ever—after years of consistent income and business tax cuts. Governor Sarah Huckabee Sanders has made clear she aims to join the ranks of no-income-tax states. That may sound like an ambitious goal, but without ambition the only other choice is stagnation. n nLouisiana rocketed up 13 spots to #18 after passing a flat tax and signaling serious intent to attract new growth. As ALEC State Chair for Louisiana, Rep. Mark Wright put it, this was just the first down payment on a broader comeback strategy. n nWest Virginia, home to ALEC’s 2025 National Chair, Senator Patricia Rucker, rose seven spots this year. Once a perennial outmigration state, West Virginia is now gaining residents on net thanks to tax reform, regulatory relief, and the landmark Hope Scholarship for school choice. n nThe Flat Tax Revolution and the Year Ahead n nDown the road, states like Oklahoma, Mississippi, and Kansas passed significant income tax reforms in 2025 and are poised to climb the rankings next year. Kansas, in particular, overcame a decade of negative media spin around past tax reform efforts to pass a successful flat tax after overriding the governor’s veto this legislative session. n nAs debates on federal taxes continue in Washington, DC, the real action is happening in the states. Legislators are lowering taxes, unleashing growth, and proving that federalism is alive and well. ALEC remains committed to equipping these policymakers with tools like Rich States, Poor States to help Americans thrive.