The State of America’s Private Sector V

There is a lot of chatter on the internet about Amity’s article revolving around how comparing Maine and New Hampshire is bogus.  Well, after considering these arguments, I wonder how critics would respond to this comparison–New Hampshire versus Rhode Island.

It would seem based on all the arguments I’ve read that Rhode Island should, without a doubt, be the winner in the race for economic prosperity.  First, consider how they are equal:

  1. Their largest city (Manchester, NH versus Providence, RI) are nearly equidistant from Boston.
  2. As such, both equally benefit from the so-called “Boston Commuter” effect from a geographical perspective.
  3. Both have an Ivy League University (Dartmouth in NH and Brown in RI).
  4. Both are NOT right-to-work states.

Yet, on other points, Rhode Island is superior to New Hampshire according to the critics.

  1. Rhode Island is a small state (the smallest in the country) so transportation costs are minimized.
  2. Rhode Island’s coastline far exceeds New Hampshire’s (which has the smallest coastline of any state with oceanfront).
  3. Rhode Island is bordered on all sides by a wealthy state (MA is the 3rd highest and Connecticut is the highest).

The chart below shows the results of this horse-race.  Prior to RI’s enactment of the sales and corporate income tax in 1947, both RI’s private sector and per capita personal income were higher than NH’s by a comfortable margin.  After 1947, NH’s private sector decisively pulls away and the gap in per capita personal income beings to narrow.

Then the final nail in the coffin was driven in 1971 when Rhode Island enacted its individual income tax.  The gap between the two states private sector continued to widen, but, more importantly, per capita personal income in NH exceeds RI for the first time in 1978.  The gap has widened ever since with NH having, in 2009, the 8th highest per capita income while RI has the 16th.

So what advantage am I missing, other than a larger private sector, does NH hold over RI that explains this difference in economic performance?

New Hampshire versus Rhode Island Private Sector and Per Capita Personal Income