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A Disturbing Glimpse of GOP's Low Tax/Limited Regulation Utopia

Posted: 02/ 1/2012 10:06 am

Recently, the US Chamber of Commerce (Chamber) ranked Tennessee No. 1 among our 50 states for its low taxes and limited regulatory environment, and recommended Tennessee as a role model for the nation.

The Chamber, Tea Party, GOP, Grover Norquist, Mitt Romney and Newt Gingrich tell us that low taxes and limited regulation will solve America's economic problems, including giving us a balanced budget. Indeed, the Republicans are making a major push to eliminate or reduce state income taxes across the US. Norquist (and others) claim that government programs are a waste, no job is ever created by government, and so on. Tennessee, under their theory, should be a low tax/limited government utopia.

Instead, Tennessee's results imply -- 'you only get what you pay for.' Let's benchmark Tennessee's performance against the rest of the US.

  • Economic: Low taxes and limited regulation haven't resulted in an economic boom for Tennessee. Among American states, Tennessee ranks 48th in median household income, and 35th for its high unemployment rate. Sadly, Chamber members aren't flocking to hire people in Tennessee (see Appendix, below, for details).

Proponents of the 'low tax/limited regulation strategy' tell us it's not just about money, but also about quality of life. So let's see how Tennessee does on some basic metrics for Health, Personal Safety, and Education:

  • Health: Tennessee ranks 45th among American states for life expectancy, and infant mortality is 30% above the national average (Appendix below).
  • Personal Safety: Tennessee's highway fatality rate is 30% above the national average. Its murder rate is 50% above the national average (Appendix below). Maybe hiring a few more police officers would help?
  • Education: Education is one of the core functions of local government, and as America moves towards a hi-tech future -- preparing the next generation should be a priority. Instead, Tennessee does poorly on both quality and quantity metrics. Particularly alarming are Tennessee's significantly lower percentages of high school, college and advanced degree graduates, relative to national averages (Appendix below).

At an overall level among American states, Tennessee was ranked 44th -- where 50th is worst-performing -- by the American Human Development Index (Index). The Index was developed:

'as an alternative to simple money metrics. It is an easy-to-understand numerical measure made up of what most people believe are the very basic ingredients of human well-being: health, education, and income.' Source: The American Human Development Project, 2012.


Correlation is not causality. But it appears that Tennessee residents receive fewer and lower quality services from their government and private sector -- because they spend less money on their government and have a limited regulatory environment.

Oliver Wendell Holmes, Jr remarked, 'Taxes are the price we pay for a civilized society,' and the word 'price' is worth emphasizing. We are a free society and can choose how much government we want to buy, and how much regulation we're willing to accept.

My point isn't that the people of Tennessee have made bad choices, or that other states have made better choices. But when a politician tells you s/he can cut your taxes and reduce regulations -- without increasing the budget deficit, and/or reducing the quantity (or quality) of services -- that politician is likely a liar.

Americans pay ~$2,200/person per year in state taxes; Tennessee residents pay ~$1,700/year.

  • If you live in Tennessee, would you vote for a candidate who asked you to pay $500/year more in taxes, but would improve state results -- with a combination of increased services and regulations -- to, at least, meet national averages?
  • If you live in another state, would you vote for a politician who proposed cutting your taxes by $500/year, but would cut services and regulatory enforcement to make that happen?
  • Do you disagree with my analysis? Do you think other factors are affecting Tennessee's performance relative to national averages?

I welcome your comments!

About the Author: Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2011-2012. He has a Ph.D. in Management from Yale University and over 20 years private sector work experience. You can follow him on twitter at: @Steven_Strauss.

Appendix with Sources
Economic:

  • Median Household Income: Tennessee's ~$40,000 (ranked 48th). National average is (~$51,000), and best performing state (New Hampshire) is ~$66,000.

  • Unemployment Rate (December 2011): Tennessee's ~8.7% (ranked 35th). National average is 7.7%, and best performing state (North Dakota) is only 3.3%.

Health

  • Life Expectancy: Tennessee's is 75 years (ranked 45th). National average is 78 years, and best performing state (Hawaii) is 82.

  • Infant Mortality Rate (measured as deaths of infants under 1 year old per 1,000 live births): Tennessee's is 8.9 (ranked 44th). National average is 6.9, and best performing (Washington State) is 5.1.


Personal Safety

  • Highway Fatalities Measured as Deaths per 100 Million Vehicle Miles Travelled: Tennessee's is 1.4. National average is 1.1, and best performing state (Massachusetts) is .6.

  • Murder Rate per 100,000 of Population: Tennessee's is 7.4. National average is 5.1, and best performing state (New Hampshire) is .9.


Education


  • Educational Attainment for Persons 25 years and older: 83% of Tennessee residents at least graduated High School, 23% obtained Bachelors' degrees, 8% went on to advanced degrees. Comparable national percentages are 85%, 28%, 10%.

 

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