Kansas Policy Institute: Debunking Junk Economics

When looking at a state to state comparison, measurement is everything. Correct measures to test a state’s prosperity must be used to determine the actual economic growth (or non-growth) a state actually sees, as in ALEC’s annual Rich States, Poor States Economic Competiveness Guide. Far too often, opponents of pro-growth reform policies use pointless measurements to emphasize their flawed assertions. Kansas Policy Institute’s staff calls them out on this attempt to use smoke-and-mirrors measurements to hide the truth in a recent blog explaining the right and wrong ways to measure a state’s economic growth:

Proponents of high taxes are again quoting a study from the Institute for Taxation and Economic Policy (ITEP). The study argues high-income tax states perform as well or better than states without-an-income tax.

The study’s result runs contrary to findings by the Organization for Economic Co-operation and Development (OECD), a Paris-based organization comprised of 34 developed countries, including the United States. The OECD study concluded: Growth-oriented tax reform measures include tax base broadening and a reduction in the top marginal personal income tax rates.

ITEP comes to their counter-intuitive conclusion by carefully choosing three measures: Per Capita Real Gross State Product (GSP) Growth, Real Median Household Income Growth and Average Annual Unemployment rate. One needs only a simple drawing to see why these variables are inappropriate measures.

To see the drawing and to continue reading head over to – http://kansaspolicy.org/kpiblog/96445.aspx