Utah ranks first while New York is dead last among the 50 states in the 2009 "economic competitiveness" index from a conservative group of state legislators.
Colorado, Arizona, Virginia and South Dakota round out the top five while New Jersey, Maine, Rhode Island and Vermont rank the lowest, according to the American Legislative Exchange Council, a group that advocates for limited government.
Utah's flat-rate personal income tax, a low state minimum wage and its "right-to-work" laws that make it harder for unions to organize helped the state maintain the top spot for the second year of " Rich States, Poor States.
"New York's high taxes helped put the state last on the index. While not factored into this year's ranking, Gov. David Paterson (D) had proposed, but has since dropped, putting a 4 percent sales tax on downloaded music and an 18 percent tax on soda drinks.
The report comes as states are trying to close budget gaps totaling some $145 billion for the coming fiscal year that begins July 1 for all but four states.
The report's authors argue that states can and should balance their budgets without raising taxes. Utah this year closed a $1 billion budget gap without raising taxes or emptying its rainy day funds. "We don't' think we've hit bottom yet," Utah State Senate Finance Committee Chairman Wayne Niederhauser (R) said on a conference call with reporters when the report was released March 17.
"You can't tax your way to prosperity," said economist Arthur B. Laffer, one of the authors of the study who popularized "supply-side economics," which promotes economic growth through tax cuts.
"High taxes don't redistribute income, they redistribute people," Laffer said, noting that he moved from California to Tennessee because of the higher taxes in California. The report takes a particular look at California, comparing the state's tax structure with Texas and reviewing California's fiscal history to explain its current budget situation.