The Small-Cap and State Competitive Environment: 1989-90 Update
VICTOR A. CANTO AND ARTHUR B. LAFFER
People tend to move to where they can improve their standard of living. This supply-side tenet has long been ingrained when it comes to East European immigration to the West or Mexican immigration to the United States. But, when this concept combines with the "one man (sic) one vote" principle, the effects are explosive.
Population changes over the past decade projected onto the 1990 census suggest that the three biggest winners will be California, Texas, and Florida. Georgia and Arizona may also pick up as many as two congressional seats each. New York leads the list of losers followed closely by Pennsylvania, Illinois, Ohio, and Michigan.
States where taxes are high and/or increasing relative to the national norm tend to experience relative population declines. Likewise, in states where taxes are low or falling, population growth is often above average. Congressional seats are allocated to states according to population as measured by decadal census data. It therefore follows that state economic policies, in due course, help to determine political power. Some states are so small that even large changes in their relative tax burdens are not sufficient to warrant a change in their congressional delegations. Likewise, some states are so close to the national norm in tax policies that they, too, experience little change. And finally, while tax policies are important, other factors also play a significant role.
In spite of the myriad of qualifications inherent in this type of research, the results are promising. The state tax burden (i.e., state and local revenue collected