In the States: Personal Income Grows Strongly

By at 25 September, 2018, 6:27 pm

Small Business Insider

All Benefit When Federal Government Moves Policy in the Right Direction

The latest data show that annualized personal income growth in the second quarter of 2018 exceeded 3 percent in 44 of 50 states. And 49 states grew at 2 percent or better.

by Raymond J. Keating-

SBE Council’s Small Business Policy Index 2018 ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

The U.S. Bureau of Economic Analysis published its latest look at state personal income on September 25, and it offers up some interesting information on the national economy, and across the states.

First, personal income numbers over the previous three years were revised. It’s worth noting that personal income growth took a big step up in 2017, with growth of 2.5 percent, compared to 1.3 percent in 2016 and 1.1 percent in 2015.

Second, the annualized growth in U.S. personal income over the past four quarters have been strong – 4.2 percent in the third quarter 2017, 5.0 percent in the fourth quarter 2017, 5.0 percent in the first quarter 2018, and 4.2 percent in the second quarter 2018.

Third, the latest data show that annualized personal income growth in the second quarter of 2018 exceeded 3 percent in 44 of 50 states. And 49 states grew at 2 percent or better.

The top five states with the highest percentage growth are:

Texas                     6.0 percent

Louisiana              5.9 percent

Kentucky              5.5 percent

North Dakota       5.4 percent

Colorado              5.3 percent

The states with the lowest percentage growth are:

Washington          1.6 percent

Rhode Island        2.0 percent

Massachusetts     2.2 percent

New Hampshire   2.7 percent

Pennsylvania       2.9 percent

These recent steps up in personal income growth are tied, in part, to the dramatic shift in federal policymaking over the past 20 months regarding taxes and regulations. An emphasis of tax increases and hyper-regulation over the previous eight years shifted in the direction of regulatory relief and restraint, and business tax relief. That has incentivized business investment, and resulted in stepped up economic and income growth.

Indeed, even the states that inflict heavy tax and regulatory burdens have benefited from these federal policy changes. At the same time, that doesn’t mean that imposing heavy and/or increasing burdens on entrepreneurship, small business and investment in the states do not have negative effects.

To the contrary, the analysis and evidence presented in the Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, which I write for the Small Business & Entrepreneurship Council, make that economic reality quite clear.

So, in this period of stepped up income growth thanks to positive changes in federal policies (minus tariffs), states should be searching out ways in which they can further improve matters by implementing wise policies of tax and regulatory relief at the state and local levels.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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