States with Higher Taxes and/or More Unions Have Worst Unemployment

By Jillian Bandes

As the nation considers increasing marginal tax rates and facilitating greater union membership, I thought it might make sense to look at the states with the highest and lowest unemployment rates to see if there might be any relevant patterns.

The six states with the highest unemployment rates are:

• 12.6% Michigan

• 12.1% Oregon

• 11.4% South Carolina

• 11.2% California

• 10.8% North Carolina

• 10.5% Rhode Island

The six states with the lowest unemployment rates are:

• 5.2% Iowa

• 5.2% Utah

• 4.9% South Dakota

• 4.6% Nebraska

• 4.5% Wyoming

• 4.2% North Dakota

In the six states with the highest unemployment rates, the average top state income tax bracket is 8.05%. All but Michigan have marginal tax rates of at least 7% (and Michigan has a very high unionization rate).

On the other hand, the average top tax bracket for the six states with the lowest unemployment is only 4.4%, with 4 of the 6 states having a top marginal rate of 5.54% or less.

Further, union representation averages 14.1% in the six high unemployment states, with a median of 17.4%. All but the Carolinas are among the most unionized states in the nation (and the Carolinas have relatively high marginal income tax rates of 7% and 7.75%).

Putting this together, 3 of the 6 states with the highest unemployment (California, Oregon, and Rhode Island) have both high marginal income tax rates and high union representation. Michigan has high unionization but moderate marginal income tax rates, and the Carolinas have high marginal income taxes, but low unionization rates.

Among the 6 states with the lowest jobless rates, 4 have low unionization rates and no state income tax or modest marginal rates and a fifth (Nebraska) has average income tax rates and low unionization. The exception is Iowa, which has average unionization rates (13%) and high marginal income taxes (8.98%).

I would put less emphasis on my analysis of the LOW unemployment states because they are all in the upper Great Plains. But the HIGH unemployment states are otherwise quite diverse (from the West Coast to New England to the upper Midwest to the Carolinas). What they share are high marginal income taxes or high unionization or both.

See also High Unemployment States Have High Income Taxes or High Unionization or Both