The 19th annual Rich States, Poor States, published by the American Legislative Exchange Council (ALEC), shows that Kansas has the worst economic outlook in the region, falling from #23 to #30. The decline comes as no surprise, as the state continues attempting to disprove Einstein’s definition of insanity by hoping that the next big taxpayer giveaway to the likes of Panasonic and the Kansas City Chiefs will break Kansas out of its fifth straight decade of economic stagnation.
Kansas continues trailing the national average on employment and private-sector GDP growth, and the gaps are growing wider.
Kansas fell from the 23rd best economic outlook to #30, and Colorado dropped from #17 to #29. Arkansas and Oklahoma have the best outlooks, ranked 6th and 8th, respectively.
Kansas also dropped in Economic Performance, a backward-looking measure of cumulative change from 2013 to 2023 in gross domestic product, domestic migration, and non-farm payroll employment. Kansas fell from #33 to #36. Only Iowa, at #41, performed worse.
Rich States, Poor States evaluates states’ economic outlook using 15 equally weighted state policy variables, as shown in the table below.
Kansas is much less competitive than regional states on tax burdens and debt service as a percentage of tax revenue. Kansas slightly reduced personal income tax rates two years ago, but still has a higher top marginal rate than every regional state except Missouri. Kansas also receives relatively low marks for personal income tax progressivity because the Legislature was unable to enact a flat tax amid opposition from Governor Laura Kelly.
The top marginal corporate tax rate in Kansas, which research shows is the most economically destructive tax, is the worst in the region.
Kansas comes in at #31 on property tax burden. Missouri and Iowa are worse, while Arkansas and Oklahoma are among the best in the nation, ranked #2 and #5, respectively. Both states have had assessment limits for more than a decade, and they keep property taxes low by relying more on sales tax to fund local government.
The City of Little Rock, for example, gets 14% of its revenue from property taxes and 42% from sales tax, while Wichita relies on property taxes for 32% of its revenue, and only 15% comes from sales tax.
Rich States, Poor States: states that spend less, tax less, and grow more
The Rich States, Poor States authors say, “Generally speaking, states that spend less — especially on income transfer programs — and states that tax less — particularly on productive activities such as working or investing — experience higher growth rates than states that tax and spend more.
Kansas spent $5,584 per resident from state funds in 2024, according to the Kansas Policy Institute Green Book, while the ten states with the most competitive state tax rankings average only $3,601 per resident. Every state provides the same basket of services (education, social services, transportation, etc.), but Kansas taxes more because it spends 55% more per resident than those states.
Operating more efficiently and reducing taxes is how Kansas will break its five-decade period of economic stagnation, not by offering billion-dollar subsidies. General Fund spending ballooned from about $6.3 billion in 2017 to $10.6 billion this year, and is now $2.8 billion higher than spending would be if adjusted for inflation and population growth since 1995.
To its credit, the Legislature reduced spending this year by about $200 million, but that still leaves more than $2 billion to go.
The state’s next Governor and Legislature will have to decide whether to continue doing the same thing over and over while hoping for a different result, or to restructure spending to operate more efficiently in order to significantly reduce taxes.
