STATES WITH NO INCOME TAX CREATED PRIVATE SECTOR JOBS AT GREATER RATE IN THE 1991-2001 EXPANSION

Little Rock--States with no income tax created new private sector jobs at a greater rate than the U.S. in the record 10-year economic expansion (March 1991-March 2001) (1), according to a Policy Foundation analysis of employment data compiled by the U.S. Bureau of Labor Statistics.

New jobs were created at a rate less than the national average in states with the highest income tax rates (District of Columbia and 14 states including Arkansas) when studied as a group.

Private nonfarm payroll employment (2) in the nine states without an income tax grew 35.4 percent as a group in the period, a growth rate greater than the U.S. average (24.4 percent).

Employment growth in the high tax states was 23.1 percent, less than the U.S. average in the 10-year period.

The nine states without an income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Fourteen states and the District of Columbia levy an income tax rate of seven percent or higher. These high tax states are Arkansas, California, Hawaii, Idaho, Iowa, Maine, Minnesota, Montana, New Mexico, North Carolina, Ohio, Oregon, South Carolina and Utah (3).

Private Employment Growth As A Performance Measure

Politicians, in an election year, tend to claim the economy in their state is performing well. Private employment growth is one performance measure of this claim. Other performance measures of politicians' claims are Gross State Product (GSP) growth and income growth (source: U.S. Bureau of Economic Analysis).

The BLS compiles nonfarm employment data for private industry sectors such as Mining; Manufacturing; Construction; Transportation and Public Utilities; Wholesale Trade; Retail Trade; Finance, Insurance & Real Estate; and Services. Employment growth can be matched to other states, a region, the national average or performance under other politicians for purposes of comparison.

Total Arkansas private employment grew 25.7 percent in the period, a rate greater than the U.S. average. Arkansas' rank for private job creation fell to 25th nationally (March 1991-March 2001) from 16th in the prior expansion (November 1982-July 1990).

Arkansas' largest (4) private industry sector (Services) created new jobs at a 43 percent rate in the 1991-2001 period. The state's growth rate (Services) was less than the U.S. average (45.8 percent) and six other states in the region: Alabama, Florida, Georgia, Mississippi, South Carolina and Tennessee. (5)

FOOTNOTES

(1) National Bureau of Economic Research (NBER). The NBER is the official arbiter of cyclical peaks and troughs. Private employment growth is compiled in this research memo by subtracting Government Employment from Total Nonfarm Payroll Employment on a state-by-state and group basis for the months of March 1991 and March 2001. Percentages were calculated using data from these two months. All data is from the Seasonally Adjusted series.

(2) The U.S. Bureau of Labor Statistics compiles Nonfarm data on a monthly basis. Farm employment payroll data is compiled at five-year intervals by the U.S. Department of Agriculture.

(3) Federation of Tax Administrators, 2002 tax rates. New Hampshire and Tennessee tax dividends and interest. States with a top income tax rate of seven percent or higher are defined as "high tax states" in this research memo.

(4) The Arkansas Services sector employed 280,200 in March 2001. Manufacturing, the second-largest private sector, employed 245,000 (BLS) in March 2001 but employment peaked seven years ago in 1995. See APF, "Arkansas Manufacturing: Structural Or Cyclical Decline?" (April 2002) Available at www.reformarkansas.org (Policy Archives)

(5) (Services, March 1991) Arkansas 195,000; Alabama 320,200; Florida 1,609,400; Georgia 634,200; Mississippi 164,300; South Carolina 293,600; Tennessee 494,000; and U.S. 28,172,000. (Services, March 2001) Arkansas 280,200; Alabama 479,200; Florida 2,679,200; Georgia 1,161,800; Mississippi 271,300; South Carolina 454,800; Tennessee 753,100; and U.S. 41,073,000.

Total Non-Farm Payroll Employment (March 1991-March 2001)

(U.S., March 1991) 108,330,000 (March 2001) 132,461,000 (States Without An Income Tax, March 1991) Alaska 241,000; Florida, 5,297,200; Nevada 627,900; New Hampshire 483,100; South Dakota 294,400; Tennessee 2,173,600; Texas 7,165,200; Washington 2,165,500; Wyoming 202,600 (March 2001) Alaska 287,600; Florida 7,195,000; Nevada 1,056,500; New Hampshire 630,200; South Dakota 379,900; Tennessee 2,723,500; Texas 9,555,400; Washington 2,716,600; Wyoming 244,200. (High Tax States, March 1991) Arkansas 932,000; California 12,397,000; Hawaii 535,900; Idaho 393,600; Iowa 1,234,000; Maine 515,600; Minnesota 2,127,800; Montana 299,700; New Mexico 582,500; North Carolina 3,059,300; Ohio 4,820,400; Oregon 1,242,400; South Carolina 1,520,400; Utah 741,400. (March 2001) Arkansas 1,160,400; California 14,718,800; Hawaii 557,600; Idaho 570,300; Iowa 1,472,400; Maine 609,200; Minnesota 2,696,900; Montana 392,400; New Mexico 757,400; North Carolina 3,932,500; Ohio 5,595,100; Oregon 1,611,200; South Carolina 1,836,200; Utah 1,085,900. (District of Columbia, March 1991) 679,600 (March 2001) 650,800

Government Employment (March 1991-March 2001)

(U.S., March 1991) 18,346,000 (March 2001) 20,793,000 (States Without An Income Tax, March 1991) Alaska 70,700; Florida, 856,900; Nevada 79,600; New Hampshire 72,600; South Dakota 63,000; Tennessee 352,400; Texas 1,270,900; Washington 406,000; Wyoming 55,600 (March 2001) Alaska 77,300; Florida 1,012,900; Nevada 125,400; New Hampshire 84,500; South Dakota 72,600; Tennessee 401,400; Texas 1,573,600; Washington 499,700; Wyoming 61,100. (High Tax States, March 1991) Arkansas 162,000; California 2,088,400; Hawaii 114,800; Idaho 84,000; Iowa 220,200; Maine 95,800; Minnesota 340,000; Montana 72,000; New Mexico 150,400; North Carolina 498,600; Ohio 724,700; Oregon 225,100; South Carolina 286,800; Utah 152,700. (March 2001) Arkansas 192,300; California 2,299,900; Hawaii 114,800; Idaho 109,500; Iowa 244,300; Maine 100,000; Minnesota 399,300; Montana 83,800; New Mexico 184,400; North Carolina 630,100; Ohio 790,400; Oregon 269,000; South Carolina 321,300; Utah 188,300. (District of Columbia, March 1991) 279,200 (March 2001) 221,900.

Private Non-Farm Payroll Employment (March 1991-March 2001)

(U.S.., March 1991) 89,984,000 (March 2001) 111,668 (States Without An Income Tax, March 1991) Alaska 170,300; Florida, 4,440,300; Nevada 548,300; New Hampshire 410,500; South Dakota 231,400; Tennessee 1,821,200; Texas 5,894,300; Washington 1,759,500; Wyoming 147,000 (March 2001) Alaska 210,300; Florida 6,182,100; Nevada 931,100; New Hampshire 545,700; South Dakota 307,300; Tennessee 2,322,100; Texas 7,981,800; Washington 2,216,900; Wyoming 183,100. (High Tax States, March 1991) Arkansas 770,000; California 10,308,600; Hawaii 421,100; Idaho 309,600; Iowa 1,013,800; Maine 419,800; Minnesota 1,787,800; Montana 227,700; New Mexico 432,100; North Carolina 2,560,700; Ohio 4,095,700; Oregon 1,017,300; South Carolina 1,233,600; Utah 588,700. (March 2001) Arkansas 968,100; California 12,418,900; Hawaii 442,800; Idaho 460,800; Iowa 1,228,100; Maine 509,200; Minnesota 2,297,600; Montana 308,600; New Mexico 573,000; North Carolina 3,302,400; Ohio 4,804,700; Oregon 1,342,200; South Carolina 1,514,900; Utah 897,600. (District of Columbia, March 1991) 400,400 (March 2001) 428,900.