Getting the Most out of Life
Rich States, Poor States: What Millennials Need to Know
The American Legislative Exchange Council (ALEC) has released the eighth edition of its State Economic Competitiveness Index, “Rich States, Poor States.” This report profiles the economic characteristics of each state in the country. Specifically, it involves two rankings: the economic outlook ranking (ECO) and the economic performance ranking (EPR). The ECO looks at 15 different variables directly affected by each state’s lawmakers. The EPR looks at three variables: state gross domestic product, absolute domestic migration, and nonfarm payroll employment.
Jonathan Williams, a representative from ALEC, says that the ECO ranking is “especially important for Millennials” because it indicates whether their state will remain a favorable one in which to work and live for years down the road. Williams notes that “low taxes and fostering competitiveness” are two key factors that states use to attract new workers and make them want to stick around.
A Rent.com study found that almost 50 percent of Millennials have moved away from the city in which they grew up. Being able to work remotely in many industries allows Millennials to move to whichever state suits them best. While family and social ties are certainly important in deciding where to live and work, it’s also important to know whether that state is rising economically and has favorable tax policies. Williams says Millennials need to be cognizant of economic opportunity because it is “the number one reason people move.”
Don’t Mess with Texas
When it comes to EPR, the Lone Star State reigns supreme. Texas is generally considered a great place for Millennials and young families. Cities such as Austin are ideal for Millennials looking to start their careers. They have several things Millennials seek: lots of young people migrating to the area, a low unemployment rate, and no state income tax. Texas actually ranked first among all states in the absolute domestic migration category, which measures the amount of people moving into the state.
Something that is not problematic in Texas, but is in states such as Illinois and Connecticut, is unfunded pension liability. Some states are not able to pay out pensions to their retirees because the money isn’t there. Williams says this should be a big red flag for Millennials because “it can forecast future economic problems and higher taxes.”
Believe in the Beehive State
Utah is on top once again when it comes to EOR, a distinction the state has won since 2008. As stated before, EOR measures a state’s ranking in 15 factors that greatly affect the amount of taxes its residents pay. Utah has a great combination of low personal and corporate income tax rates, no estate tax, and minimal change in income tax progressivity.
“States are trying to attract workers in different ways,” Williams says. And from the report’s results, it’s clear that states such as Utah and Texas are doing a much better job than others. Millennials should do their due diligence when deciding where to move, keeping in mind the long-term effects of taxes and economic competitiveness on their careers. The “Rich States, Poor States” report is a tremendous resource to help with that choice.