Opinion: Why Utah’s 16-year winning streak is no accident
After 16 straight years of their state being crowned as the one with the best economic climate in the country, Utahns may be excused for thinking they can take success for granted.
And yet, this record is not an accident. Utahns should be grateful for the policy decisions, social climate and individual citizen and community choices that helped make it so. And Utahns should work to ensure the state’s politicians and institutions continue to hold to those successful policies and principles in the future.
Growth comes with its own set of challenges, of course. That is especially true in a desert where resources are precious. The more people who move here, the more difficult those challenges become. But, if handled correctly, the advantages of growth far outweigh the disadvantages, and the challenges of growth are much preferred to the challenges of economic decline and population loss, with its declining tax base and dwindling opportunities.
Each year, the American Legislative Exchange Council publishes a report it calls “Rich States, Poor States.” It’s an attempt to rank states based on metrics concerned with limited government, free markets and federalism. The latest results were released earlier this month, and Utah came out on top for the 16th straight year.
But the American Legislative Exchange Council isn’t the only group to take note of Utah’s economy. For example, in the U.S. News and World Report’s rankings of states Utah comes in third and is credited with the number 1 economy overall. And several years ago, the Wall Street Journal acknowledged Utah’s track record, dubbing it “America’s Economic Star.”
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The metrics highlighted by the “Rich States, Poor States” report are more conservative in nature. Liberal states that the report’s authors would say embrace government interventions and excessive regulatory control tend to perform poorly on this report. New York finished last, for instance. But the results do correlate roughly with other measures of growth rates and prosperity. During much of that 16-year period, Utah also led the nation in population growth, posting an 18.4% gain during the decade of the teens.
Even during the turbulent pandemic years of 2020-22, when many people stayed home and growth trends became hard to predict, Utah grew by just under 3%, which was among the highest rates in the nation. Utah County alone grew by an astounding 4.3%, according to Census data.
Those figures validate the Rich States, Poor States data, as does the fact that New York and Illinois shrank during those years, undoubtedly spurred by the newfound freedom to relocate that many people enjoyed because of work-from-home policies.
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Among all the categories in this year’s Rich States, Poor States, Utah was near the top for its remaining tax burden after state sales, income and property taxes are considered. These remaining taxes are generally translated as local taxes. This speaks to the limited ability state lawmakers give local governments to raise revenue on their own. The so-called “truth in taxation” law, for one thing, keeps local governments from capturing more revenue than they did the previous year, with the exception of an allowance for natural growth. Any increase must be declared a tax hike, resulting in a public hearing.
This has been a powerful leash on local government spending. A 2018 study by the Utah Foundation concluded that this law has kept the line on property taxes despite soaring home prices in recent years.
The state scored 11th for marginal corporate income tax, 12th for personal income tax progressivity and 15th for its property tax burden. Its lowest rank, 37th, came for its sales tax burden. But conservative lawmakers have made a point of preferring the sales tax, which is a levy on mostly voluntary consumption, to a tax on earnings, or income taxes. As the adage goes, the more you tax something, the less of it you get. It makes little sense to incentivize less initiative to work hard for earnings.
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The report was authored by economists Stephen Moore, Arthur Laffer and Jonathan Williams. It is touted as a report that reflects policies over which state political leaders have direct influence.
That influence can be wide and varied, and it has several facets. Moore, a co-author who is a senior fellow at the Heritage Foundation, told Fox News, “Utah has been No. 1 for (16) years because of its solid pro-business policy regime.”
But there is much more that goes into an economy than policy regimes. Utah, for example, has for decades had one of the highest birthrates in the country as well as one of the highest rates of children raised in married two-parent households. And with lower rates of smoking and drinking, Utah’s population tends to be healthier. Utah also touts higher rates of upward mobility, social cohesion and volunteerism. Policies matter, but the social environment from which economies arise plays a role.
And the environment itself can be a factor. Lawmakers this year spent considerable money on efforts to save the Great Salt Lake from extinction, as well as to enhance other waterways threatened by a persistent drought. Some critics said these efforts were not enough. That expenditure, which now totals nearly $1 billion over two years, has little direct impact on business in any way the report might measure. However, without a healthy environment, growth would stop and business would evaporate.
Reports such as these, then, are limited by what they measure. Still, Utah’s impressive and ongoing growth rate — the Kem C. Gardner Institute says most of it is driven by in-migration and will become increasingly diverse with time — is definitely worth celebrating.
