State Income Tax and State Rankings

Recently there have been a few lists ranking cities. The Milken Institute put out one. The Brookings Institute put out one that was reported in Business Insider: Most Miserable Cities and Least Miserable Cities. Also the Urban Institute put out a list on their MetroTrends website (I found out about this one from the twitter feed of the Urbanophile).

A lot of the lists are pretty equal. They look at things like the unemployment rate, the real estate market, gross metropolitan product, and recent trends in those statistics. Texas cities have done well, California did badly, Illinois did okay (but kind of on the bad side of okay).

When I would tell people that I was thinking about moving to Texas, a lot of people would regurgitate the fact that Texas has no state income tax. A lot of people seem to think that lowering taxes is the answer to all our problems. And the source of all our goodness. But is that true?

On one of the lists, Seattle ranked pretty low. Las Vegas scored the lowest. And everything in Florida scored near the bottom. Washington, Nevada and Florida have no state income tax. If no state income tax was the answer to all the world’s problems, then why aren’t those states doing better?

On top of that, some of the states that have no income tax (like Texas, South Dakota, Wyoming and Alaska) get a lot of money by leasing land to oil and gas companies. Which sounds kind of socialist to me.

Image from Wikipedia