'Competitiveness' Outlook Ranks Michigan 12th Best

They 7th edition of “Rich States, Poor States” was released recently and it ranks Michigan 12th best among the 50 states for its “economic outlook” based on 15 public policy variables, such as tax, business and labor policies. The higher position may signal better economic times ahead for Michigan.

This is the highest rank achieved by the Great Lake State since the index’s creation. Since 2009, Michigan has steadily moved from near the bottom (34th) to where it is now.

The index is created from 15 variables that the authors believe contribute to a states’ economic well-being: marginal personal tax rates; marginal corporate tax rates; personal income tax progressivity; property tax burden; sales tax burden; remaining tax burden; estate tax levy (if any); recent tax changes; debt service as a share of tax revenue; public employees per 10,000 of state population; the state’s liability system; state minimum wages; average worker’s compensation costs; whether or not a state has a right-to-work law and whether or not a state maintains expenditure limits like the Headlee Amendment.

The good news is that these variables — measured through 2012 — rank Michigan relatively high for future economic performance. The bad news is that the authors still rank Michigan low (dead last, actually) for actual performance based on three major metrics: state gross domestic product, domestic migration and non-farm payroll employment over the previous 10 years.

These measures will keep Michigan ranked very low in the index’s ranking due to the state’s performance during the 2000-2009 time frame. As Mackinac Center analysts have pointed out repeatedly, Michigan was the only state in the union to have negative state GDP and a net loss of population during the past full decade. During that time period, Michigan was adopting several harmful policies: large tax hikes, a failure to truly balance its budget, paying more and more for public employees and grappling with forced unionization.

The good news is that our outlook is encouraging. In addition, “Rich States, Poor States” is not the only index that ranks performance in vital policy variables. The Tax Foundation’s Business Tax Climate Index has also noted Michigan’s policy improvements in recent years and that, too, bodes well for the state’s future.

There have been some recent set-backs, but Michigan has been steadily improving its economic policies. Lawmakers should keep it up.