Several states led by Democrats are ranking poorly in terms of economic success and competitiveness while continuing to implement progressive policies that affect taxpayers.
On Wednesday, the American Legislative Exchange Council (ALEC) released its 19th edition of “Rich States, Poor States,” which places New York, New Jersey, California, and Illinois at the very bottom of its rankings. The analysis evaluates states based on 15 different “policy variables,” including gross domestic product (GDP), migration patterns, and payroll employment.
“We assess the states using these 15 equal factors, which cover areas like taxation, spending, and tort systems,” remarked Jonathan Williams, ALEC’s President and Chief Economist. “These factors are all under the control of state legislatures.”
Interestingly, nine out of the ten lowest-ranking states are under Democratic trifectas, meaning that the party controls both legislative chambers as well as the governor’s office. The exception is Vermont, which is typically considered deep blue but has a socially liberal Republican governor, Phil Scott, who is critical of Trump.
New York claims the last position for the 13th consecutive year. The report highlighted that it has the second-highest marginal personal income tax and the highest corporate tax rates, at 14.78% and 18.28%, respectively. There hasn’t been significant improvement in property or sales tax burdens in the state.
Another concerning detail from the study indicates that New York experienced the worst domestic migration, losing over 1.5 million residents from 2015 to 2024. This outflow has led Democratic Governor Kathy Hochul to implore those who moved to states with lower taxes to return, expressing concerns over the eroding tax base.
California, also under a Democratic trifecta, ranked 47th. It has the third-highest personal income tax rate and the most progressive taxation approach. Despite ranking 25th in economic performance for 2025, the state saw a net loss of around 1.4 million residents over the past decade.
Williams commented, “What connects these ten states is a philosophy of taxing, spending, regulating, and catering to special interests through cronyism. That’s the trend among states adopting poor policies.”
Williams also warned that the ongoing net migration losses in states like New York and California could lead to more budget deficits, given the shrinking tax base and businesses moving to more conservative states.
California’s Governor Gavin Newsom, frequently mentioned as a potential 2028 presidential candidate, has defended his governance, including the state’s economic strategies. He pointed out that California’s poverty rate is about average, similar to states like Florida and Louisiana, addressing concerns during an interview with Katie Couric.
In contrast, eight out of the ten top-ranking states in economic performance are Republican-dominated, with Florida and Tennessee leading the way. Notably, these states do not impose a personal income tax and maintain less progressive taxation policies.
Florida, for instance, exhibited the best economic performance in 2025, with its GDP rising by 98% in the last decade. Similarly, Utah, noted for having the most favorable economic outlook, saw a GDP increase of over 110% during the same period, thanks to a marginally progressive tax system.
Williams pointed out that states without a personal income tax tend to spend 50% to 60% less per person than those with higher tax burdens. He highlighted Utah, ranked first overall, for its advantageous economic policies, including a flat tax structure and proactive management of pension and unfunded liability issues.
“States that don’t advance can easily fall behind, while those at the top keep pushing forward,” Williams added.
This analysis from ALEC arrives amid rising consumer concerns about soaring gas prices due to the ongoing conflict in Iran. Additionally, consumer confidence saw a significant drop in March, largely influenced by fears of inflation spiking further due to these global events.
