Kudlow: Follow the Money

Economist Larry Kudlow sites a story from the NY Times, which includes this bit:

The Bureau of Labor Statistics reported Thursday that union membership fell by 326,000 in 2006, to 15.4 million workers, bringing the percentage of employees in unions to 12 percent, down from 12.5 percent in 2005. Those figures are down from 20 percent in 1983 and from 35 percent in the 1950s…

Kudlow then observes:

Take a look at the high union states vs. the low union states.
The high union states—New York, New Jersey, Washington, etc—also happen to be high tax, slow growth, population losing, states.
On the other hand, the low union states—places like Utah, Virginia, and both Carolinas—are low tax, pro business, population growing states, with strong economic growth.
It tells you something, doesn’t it?

For more on the “population losing” part, check out this regional analysis by Michael Barone (and he really digs deep in this breakdown). Barone notes:

As for internal migration, people are voting with their feet against the East and California in droves. Here are the states with the biggest negative net internal migration:
Calif. 287,684
La. 241,201
N.Y. 225,766
N.J. 72,547
Ill. 68,661
Mich. 65,123
Mass. 49,528
Ohio 48,153
These tend to be states with high tax rates, high housing costs and aging industrial bases.
Here are the states with the biggest positive net internal migration:
Texas 218,745
Fla. 165,757
Ariz. 129,987
Ga. 120,953
N.C. 104,133
Nev. 53,105
Tenn. 50,383
S.C. 47,950
These tend to be low tax states, with booming economies. And mostly southern: the only western states are Arizona and Nevada. Indeed, the net internal in-migration into the Rocky Mountain states (268,607) is lower than the net internal out-migration from California (287,684).

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klaus
klaus
14 years ago

And, interestingly enough, the high-tax states also happen to be high-income states. And they also tend to be states that pay waaaaaayyyyy more in federal taxes than they receive in federal benefits.
In fact, 4 of the 5 states with the highest tax burden have the highest income levels. And 4 of the 5 states with the lowest tax burden have the lowest income levels in the US.
By the definitions set out by Kudlow, Mississippi and Alabama should be capitalist paradises. They have very, very low taxes, few unions, and a business-friendl state gov’t. And they also have very, very low wages. And the southern states generally receive more in federal tax benefit than they pay in federal taxes. Florida is an exception; it gets about $1 in benefit for every $1 it pays,
In other words, places like NY, NJ, OH, and Mich are subsidizing life in the South.
And note, Mr Kudlow doesn’t seem to notice this situation. Couldn’t be that his ideology made him overlook a few basic facts, could it?

Maggie's Farm
14 years ago

Saturday Morning Links

Hollywood loved Bill, but they do not seem to love Hillary. Not their type. Heck, that’s in her favor, but she is not for me.Does Mormonism bother you? Not me. RWNH. Romney is OK with me.Where would we be without government’s help? Spain decrees fashion s

buddy larsen
buddy larsen
14 years ago

Do you have any cites, klaus? Wondering about that “waaaay more” thing.

John
John
14 years ago

I work for a company that just closed its operations and left RI, Klaus. Why? Oh, high taxes for which you get poor schools, the nation’s most generous welfare programs, terrible roads and bridges, a level of public debt and unfunded liabilities that guarantees those taxes aren’t falling in the future (absent radical reforms our management concluded weren’t going to happen), such friendly and efficient service from so many state and town bureaucrats with gold plated health insurance and pension benefits, and RI’s charming pseudo-Sopranos “I know a guy” culture you encounter whenever you have to interact with the government — which, in RI, is more often than most places. And so, Klaus, say “bye bye” to our tax revenue, and to our support for the Blue Cross RI risk pool — we had young workers paying a lot more in than they were spending in health care costs, which was helping to hold down RI’s very high small business health insurance rates. Klaus, I hope you and your friends enjoy the progressive paradise you believe you are creating here. We didn’t and we left. And you can count on us to make sure everyone we meet is perfectly clear on what lies in store for them if they ever think of moving to RI. Not that we won’t keep enjoying the nice things the state has to offer — we can still vacation here in the summer. But we are one group of suckers, sorry, I mean taxpayers, that will no longer be played for fools by you and your ilk. By the way, if you ever move beyond the barroom rhetoric stage, and start spelling out just what policies you’d change, and how, to fix things in RI, I’m sure lots of people on this blog would look… Read more »

Justin Katz
14 years ago

Quick question, Klaus: Does it factor into your worldview, at all, that the ultra-rich help to keep coastal medians high?
As for the “waaaaaayyyyy more” thing, I took a look at this claim a while back. As it turns out, if you dig down to the county level, red counties generally pay more in taxes, while blue counties receive more in federal aid, no matter the state. What Rhode Island may be pioneering is the experiment of driving out enough business, and enough conservatives, to find out what happens when all that’s left are the Democrats’ deep dark secret ultra-rich and the dependents whom the Democrats parade.

frank
frank
14 years ago

Even though the wealthy state/high tax relationship has been deconstructed by the county level data, I have a question for Klaus.
Are you suggesting that the strong union presence in RI and other union-heavy states has created the high wages and wealth that exist in these states?
People and families are migrating between states because they can improve their financial situation. Most have determined that they are better off in a “low wage/low tax” environment. Can you blame them? It seems that it may be worth making a litte less when an unnecessarily large percentage of one’s income doesn’t have to be spent on the services that unions, especially public employee unions, have to offer. Very interesting.

johnpaycheck
johnpaycheck
14 years ago

ri is on a slide, we are headed towrds a financial crisis. and its not if but when.

Ragin' Rhode Islander
Ragin' Rhode Islander
14 years ago

Sometime ago I read a book that made an interesting point concerning taxes. It discussed the cumulative effect that higher taxes have on one’s economic prospects, i.e., given the “magic” of compounding interest, how much more a person could have when approaching retirement if over the course of their working lives they one had been able to instead put that higher tax money into an investment account. Even for a “working class” or “middle class” person, over a working lifetime this swing can equate to several hundred thousand dollars more – or less – in the bank. Here in Rhode Island all “working people” (i.e., those whose income is not 100% welfare) suffer from the PARASITIC DRAG caused by the insatiable demands of the “rent seekers” – public sector unions and the welfare industry. No matter one’s income level, we pay for it in high excise taxes (gasoline, liquor, cigarettes); high sales taxes; high property taxes and high income taxes. That is the genius of the Democrat General Assembly – they hit everybody with extraordinary taxes, but have managed to convince “working families” that it is only happening to the “rich” (though spiraling property taxes are beginning to awaken the masses). Just think of how much more money each of us could have if, since we started working, we could have put the money we have paid in excessive taxes into an IRA! Consider: Persons of even moderate income in RI, once one considers the combined effect of sales, excise, income and property taxes, will pay excessive taxes of multiple thousands of dollars a year. Say instead, starting at age 20, and working until 65, that person was able to devote the money into an IRA. If we assume an 8% average return, and 3% average inflation, EACH thousand dollars… Read more »

buddy larsen
buddy larsen
14 years ago

Great comments, RI-ers. Can’t help but wonder where Lincoln Chafee has been all these years.

SusanD
SusanD
14 years ago

“parasitic drag”
I like that. Right on the money on all fronts, Ragin’.
I’m still waiting to hear from anyone – other than someone in the poverty industry – how Rhode Island’s exceedingly generous welfare benefits are in the best interest of either recipients or the state.

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