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Table 10

1990s Economic Growth in 10 Highest Tax States and 10 Lowest Tax States

1990

Real

per Capita

Personal

Employ-

State Tax

Population

Income

ment

Revenue U.S.

Growth U.S.

Growth U.S.

Growth U.S.

State

(1997 $) Rank  1990­97 Rank 1990­97 Rank 1990­97 Rank

U.S. Total

$1,446

7.3%

16.5%

9.1%

High-Tax States

Alaska

$3,435

1

10.2%

13

6.1%

47

15.8%

12

Hawaii

$2,578

2

6.7%

23

3.6%

50

3.8%

43

Delaware

$2,074

3

9.3%

16

17.3%

21

7.0%

35

Connecticut

$1,968

4

-0.6%

49

10.0%

40

-6.0%

50

New York

$1,953

5

0.8%

47

7.5%

46

-1.6%

49

Massachusetts

$1,913

6

1.7%

43

11.2%

36

3.2%

46

Minnesota

$1,910

7

6.8%

21

18.1%

17

11.9%

20

Washington

$1,861

8

14.5%

7

25.5%

10

18.0%

7

California

$1,782

9

7.8%

18

7.7%

45

4.5%

42

Wyoming

$1,657

10

5.8%

28

13.4%

34

6.7%

37

High-Tax States Total

5.5%

9.9%

3.9%

Low-Tax States

New Hampshire

$658

50

5.5%

30

15.2%

29

5.6%

40

South Dakota

$882

49

5.9%

26

17.9%

18

14.1%

14

Texa s

$1,061

48

14.0%

8

27.0%

8

15.8%

11

Tennessee

$1,066

47

9.8%

15

24.6%

11

13.3%

16

Colorado

$1,141

46

17.8%

5

34.3%

3

24.6%

4

Mississippi

$1,142

45

5.9%

25

22.8%

13

9.1%

30

Alabama

$1,159

44

6.7%

22

18.2%

16

17.3%

8

Nebraska

$1,176

43

4.8%

35

15.1%

30

10.9%

24

Arkansas

$1,180

42

7.2%

20

21.9%

14

9.5%

29

Missouri

$1,184

41

5.4%

33

15.4%

26

13.2%

17

Low-Tax States Total

10.5%

23.7%

14.9%

states was between Aa and A1. Moreover, the

lead to a subsequent deterioration in a state's

Revenue growth is

tax-cutting states had much larger budget

fiscal condition. The evidence from the 1990s

often faster than

reserves (7.1 percent of state expenditures)

indicates that they do not. If tax cuts con-

anticipated in tax-

than the tax-increasing states (1.7 percent).30

tribute to fiscal deterioration, then the bond

ratings of states that cut taxes should be worse

Because state tax cuts can stimulate eco-

cutting states and

than those of states that raise them. A com-

nomic development in a state, whereas state

slower than antic-

parison of tax-raising and tax-cutting states in

tax hikes can retard it, revenue growth is often

the early 1990s found that the average

faster than anticipated in tax-cutting states

ipated in tax-rais-

Moody's bond rating in 1995 of the tax-cut-

and slower than anticipated in tax-raising

ing states.

ting states was between Aaa and Aa. The aver-

states. After California's record $7 billion tax

age Moody's bond rating of the tax-raising

hike in 1991, actual revenue growth came in

22