Study outlines the road to economic recovery

COEUR d'ALENE - Idaho is already seen as one of the most business-friendly states, and a new study moves it up significantly when compared to other states.

According to the latest edition of a study by the American Legislative Exchange Council (ALEC), Idaho's economic outlook has improved and now ranks seventh out of the 50 states. As states face their toughest budgetary climates in a generation, the third edition of "Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index" points out what they should do to alleviate their fiscal pain.

"We cannot spend, borrow or tax our way into prosperity," said Rep. Jim Clark, R-Hayden Lake, chairman of the Judiciary, Rules and Administration Committee - and ALEC's Idaho State Chairman. "State government must learn to live within its means, as we continually look for ways to make our great state more competitive and cultivate a business climate that will produce jobs."

Idaho significantly improved its economic outlook ranking in the past year, climbing from 14th in 2009 to 7th this year. Idaho earned high marks for its relatively low property tax burden, good labor policy, lack of a state death tax, and the second lowest state debt ratio in the nation. However, the study points out that Idaho still has room for improvement - especially with the state's higher than average income tax rates.

Todd Christensen, president and chief executive officer of the Coeur d'Alene Chamber of Commerce, says the study ignores that Idaho's corporate tax rates are based on net income, not gross as in some other states.

"Idaho looks to them for taxes when they are profitable," he said. "Other states like Washington collect if there is a profit or not."

Idaho also does not have business and occupation taxes, Christensen said.

"B and O is a killer," said Steve Griffitts, president of Jobs Plus, visiting the Washington, D.C., area on Thursday, visiting legislators and seeking to recruit business to the area. "This is one arrow in my quiver."

He said it is good to see the state recognized for its pro-business government.

"It reinforces what we already tell people," he said. "In the manufacturing sector we just wipe out the competition."

He noted that the top states are, like Idaho, fiscally conservative.

What the study does point out is that Idaho has a stable business and living environment, Christensen said.

"Moving from 14th to seventh is obviously reflective of what is taking place throughout the economy," he said. "In Idaho government does have to live within its means."

Among neighboring states, Montana's economic outlook ranks 33rd, Wyoming ranks sixth, Utah ranks first, Nevada ranks 11th, Oregon ranks 41st, and Washington ranks 24th.

Co-author and renowned economist Dr. Arthur B. Laffer summarized the report's findings when he said, "Tax and economic policies are essential to the competitiveness of our states." "Rich States, Poor States" presents state economic outlook rankings based on public policies that have a proven impact on growth, revealing which states have the best chance of experiencing economic recovery, and which need to re-examine their policies before they can expect to see improvement.

Laffer and his co-authors, Stephen Moore, senior economics writer at The Wall Street Journal, and Jonathan Williams, director of ALEC's Tax and Fiscal Policy Task Force, analyzed how economic competitiveness drives income, population and job growth in the states. They found that states with a high and rising tax burden are more likely to drive away individuals and business, while those with lower and falling tax burdens are more likely to attract businesses and create jobs.

"Our research shows that states with responsible spending and competitive tax rates enjoy the best economic outlook," Williams said. "States do not enact changes in a vacuum - every time they increase the cost of doing business in their state, their state brand immediately loses value."

Christensen says the study is positive news for Idaho.

"It highlights the strength of Idaho's approach to a level tax policy," he said.

To read more about the state-to-state comparisons and view the full report, download it for free at www.alec.org. The American Legislative Exchange Council (ALEC) is the nation's largest nonpartisan, individual membership organization of state legislators.