Drowning in numbers
The Tax Foundation, a nonpartisan think tank based in Washington, D.C. has issued its annual state business climate rankings. (Click here for an executive summary.(PDF) Click here for the full study.)
North Carolina doesn’t come off all that well, ranking 40th out of 50 states in the foundation’s measure of business friendliness.
Now if you seem to remember other reports about the state’s business-friendliness that suggested we were ahead of the game, not behind the curve as the foundation’s report suggests, you’re not crazy. (More after the jump.)
Gov. Mike Easley’s office regularly busies itself with releases like this one and this one, which trumpeted “Forbes.com, web site of Forbes Magazine, has named North Carolina the third best state for business in the nation.”
So who to believe?
There’s a little bit of truth in all of this stuff. Dell and FedEx aren’t just coming here for the barbecued pig and textile companies didn’t head over seas because they had a hankering for authentic General Tsao’s chicken.
And remember, what this latest report is really talking about tax policy, a subject that can get pretty arcane pretty quickly. And you’ll see conservatives jump on this latest report pretty quickly, like this canned comment from the Joseph Coletti at the John Locke Foundation:
“The Tax Foundation’s latest report on state business tax climates provides another stark reminder that North Carolina’s high personal income and sales tax rates hurt businesses and the overall economy. North Carolina has one of the worst business tax climates in the country, according to the study to be released October 11.
But left-of-center groups say the state’s tax code needs work as well. The Center for a Better South recently put out a book that looked at state tax structures and found many states wanting from a progressive/social liberal perspective, including North Carolina.
So let’s leave the question of business climate aside – agreeing for the moment that North Carolina has its good points and bad when it comes to landing and keeping industries – and talk about the narrower topic of the state’s tax environment.
If there is a consensus opinion it is that North Carolina’s current tax code isn’t wieldy and while it may have been keen in a 1940s manufacturing/agrarian economy it doesn’t work today. The state’s tax structure was in part to blame for the wild swings in the budget surpluses and deficits we saw during the late 1990s and early part of this decade and there’s no sign the roller coaster ride is going to stop any time soon.
Changing the tax code, one way or the other, forces us to think about entering the political arena. To wit, a political question: Will this latest report do much to sway the Nov. 7 elections?
Probably not. A preponderance of voters will care about their own taxes and their own financial situations above what a think tank says about the state’s business climate. And business leaders have already figured out who they consider friendly and unfriendly to their causes for purposes of campaign giving.
The bigger political question comes once the legislature is in session. Can the General Assembly take all this constructive criticism and do something about it? That’s a more complicated question that it seems because you’re not just talking about a traditional two-party Republican vs. Democrat discussion.
If there actually were to be a serious-minded debate on changing the state’s tax structure, both houses of the General Assembly would break down into five or six broad factions. In addition to pro-business conservative Democrats and business friendly Republicans, social conservatives, social liberals, environmental liberals, and pro-education centrists would just be a few of the groups pushing and pulling on the process in pursuit of their own ends.
Even if Democrats keep control of both chambers, many of these same factions will show up within their caucuses.
To get something done would require leaders considered honest brokers by all sides of the equation. And anyone who has been paying attention to the intramural fighting by Republicans in the House, Speaker Jim Black’s public troubles, or who watched the 2005 Senate lottery vote, will question whether those kinds of mutually accepted leaders exist now or will after the election.