New Blog Series: The Real Path to State Prosperity

September 11, 2017
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Business rankings have long been used as a method to examine which states are implementing policies that court and help thriving businesses and ultimately the state’s overall economic prosperity. Chambers of Commerce, elected offiicials, and economic development agencies often use such rankings to tout their states. But do these rankings truly reflect what helps workers, business, and state economies flourish? We’re not so sure.

Two large proponents of these rankings are the Tax Foundation and the American Legislative Exchange Council (ALEC). For example, ALEC’s Rich States, Poor States is an economic outlook ranking that ranks states based on 15 state policy variables. The overall argument in their reports is that states that tax and spend less see higher growth rates than do states that tax and spend more. However, relying solely on a state’s tax system is a poor indicator of whether or not businesses will locate in a specific state and will therefore help a state’s economy prosper. In fact, evidence shows productivity of workers and local economies, investments in human and physical capital, and many other factors play a much bigger role in leading states to a prosperous economy.

A well known example of a tax cut experiment gone wrong came out of our neighboring state, Kansas. In 2012, Governor Sam Brownback signed legislation which sharply cut income taxes across the board that leaned towards the wealthy, and that ultimately cut the state budget by 13 percent. The Brownback administration, much like ALEC members, believed that drastic cuts to state income taxes would generate thousands of jobs and encourage the growth of small businesses. However, not only did Kansas not see a growth in its economy, but its bond rating went down and they cut funding for vital services and programs including education.  Five years later, the experiment proved to be such a failure that the Republican-lead Kansas legislature voted to raise taxes overriding a Governor veto. Kansas has since served as a prime example of the negative effects of supply-side tax cuts as a method for measuring economic prosperity for the rest of the nation.

As Colorado enters its third longest economic expansion since 1900 and our unemployment rate – 2.3% – is at an all-time low (the lowest in the country to be exact), it is a good time to talk about what has really led our state to this time of economic prosperity. In particular, what strategies have worked, what policies have been passed, and/or what programs have been implemented that have allowed Colorado’s economy to continue to grow since 2009.

That is why we are creating a new blog series titled the “Real Path to State Prosperity.”  This six part series, beginning in October, will focus on six distinct areas that create long term shared prosperity, not just in Colorado but in all states. Within each blog we will highlight our work, as well as the work of our partner organizations whose commitment to economic prosperity has created a thriving Colorado.

Using framework from Peter Fisher’s, Grading the States, Business Climate Ranking and the Real Path to Prosperity, which is dedicated to explaining how states can truly promote long term growth and broadly shared prosperity, we will focus on the following topics:

  1. The Importance of Productivity, Wages, and Shared Prosperity
  2. How Education & Job Training Boost Productivity
  3. Investments in Infrastructure Bring High Returns
  4. Healthy Workers Are More Productive
  5. Innovation and Entrepreneurial Activity are Key to Economic Growth
  6. Making Sure Productivity Gains Lead to Higher Wages

It is our hope that the “Real Path to State Prosperity” blog series will provide us an opportunity to rexamine and redefine what investments in our communities actually lead to thriving businesses and broadly shared economic prosperity for all Coloradans, as well highlight the progress we’ve made in Colorado.

Stay tuned for our first report coming in October.  Follow us on Facebook or subscribe to our email list to receive updates about the blog as soon as it becomes available.

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