Indiana has the fifth-best economic outlook according to the 2024 edition of “Rich States, Poor States,” the annual report developed by the American Legislative Exchange Council to determine competitiveness among the 50 states.
The 17th annual edition of the report, which was released Tuesday, marks the Hoosier State’s best showing since 2020 when it ranked fourth nationally. “Rich States, Poor States” economic outlook ratings are based on performance in 15 policy categories, which are controlled by state legislatures.
Only Utah, Idaho, Arizona and North Carolina earned higher rankings than Indiana.
ALEC, which produces the report in partnership with Laffer Associates, gave Indiana top marks for being a right-to-work state, maintaining the minimum wage at the federal $7.25-per-hour level and eschewing estate taxes. Indiana also had the nation’s sixth-best workers’ compensation costs, with an average expenditure of 86 cents per $100 of payroll. In addition, the state had less than 470 public-sector employees per 10,000 residents, which was the eighth lowest in the U.S.
Indiana did not finish in the bottom 10 in any of the 15 metrics. Its worst rating was for sales tax burden, finishing 32nd nationally with taxpayers spending $24.89 per $1,000 of income on the state’s sales tax. Indiana is one of six states with a state sales tax of at least 7%. However, it is among 13 states that do not allow municipalities or counties to implement a sales tax.
The state has finished in the top 10 for economic outlook each year since 2014. That was one year after it repealed the inheritance tax and two years after it became a right-to-work state.
“Generally speaking, states that spend less — especially on income transfer programs — and states that tax less — particularly on productive activities such as working or investing — experience higher growth rates than states that tax and spend more,” the report stated.
Compared to neighboring states, Indiana was the only state in the top 15 for economic outlook. Michigan was 16th, Ohio was 26th, Kentucky was 28th and Illinois was 48th.
Indiana did not fare as well in ALEC’s economic performance rankings, which evaluates each state’s gross domestic product, migration and non-farm payroll from 2012 to 2022. The state was ranked 19th in that section of the study. However, the data shows Indiana’s GDP and domestic migration have recorded their best growth in the last two years. The report also indicates that non-farm payroll has increased more since 2020 than it did from 2013 to 2019.
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