PRESS RELEASE: KEPC Reacts to ALEC ‘Rich States Poor States’ study

June 22, 2011

Contact: Bernie Koch

WICHITA, KAN. – Kansas Economic Progress Council Executive Director Bernie Koch reacted to the annual American Legislative Exchange Council Rich States Poor States study, which was released today. The study ranks Kansas 27th among the states in overall economic outlook and 34th in economic performance.

Koch’s statement:

“The Rich States Poor States study is an informative and useful document. It is important to review where a state stands on taxes and regulation. However this is a narrow approach to the overall evaluation of economic outlook. It gives heavy weight to taxes and regulations. Other factors not evaluated in the study have been shown by respected empirical studies to be as important, if not more important, including investment in infrastructure and equipment; labor efficiency; education; and innovation.

“KEPC recognizes the following elements are important to economic health and growth: The investment rate in plant and equipment, including efficient physical and communications infrastructure, has a strong positive impact on growth. The higher an economy’s capital intensity (machines, buildings, roads, bridges, etc.), the more prosperous the economy. Human capital and the efficiency of labor have also been shown to be significant to growth. Measures of human capital include the literacy rate, school enrollment ratios, and labor demographics. Linked to investment and human capital, there is substantial support for the contribution of continuing technological innovation and improvement in sustaining economic growth.

“This suggests that support for research and development and education is important. Public policy which supports economic freedom through open economies supports higher growth rates. We would include tax structure and business regulation in this category. Reliable legal systems are a significant basis for economic growth. These systems provide dependable enforcement of private contracts, protection of private property rights, effective law enforcement, and an absence of corruption. As a study for the Council on State Taxation (COST) noted earlier this year, ‘non-tax cost factors are usually more significant in determining the overall cost of operating a facility in each state… The Kansas Economic Progress Council believes there can be a positive impact on the economy by strategically lowering taxes. We believe Kansas needs to study tax structure changes very carefully, especially their impact on other factors that are clearly essential elements of a healthy, growing economy. We caution against concluding that simply lower taxes and spending cuts will lead to economic growth.”

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