The Tax Foundation today released its FY 2011 State Business Tax Climate Index. North Carolina drops from 39th to 41st – placing it among the ten worst business tax climates in the nation. North Carolina rates the worst in the southeast, with the next-lowest ranking in the region being Tennessee at 27 (expanding the regional scope we see West Virginia at 37 and Louisiana at 36 – it can’t be a good sign when you’re ranked worse than West Virginia).
This stands in contrast to Forbes ranking NC number 3 for “best states for business” and Site Selection Magazine’s awarding NC its top slot for nation’s best business climate. The Governor’s office annually crows about these rankings. I doubt there will be any press releases discussing the Tax Foundation’s Index.
Moreover, the Small Business and Entrepreneurship Council places North Carolina 37th in their tax index for small businesses – also among the worst in the nation and worst in the southeast. This is another business ranking Perdue’s office won’t mention.
So how to settle the major discrepancies? Look at the results.
A major indicator of NC’s economic performance is the rate of private sector job creation. I recently examined private sector job growth among the 50 states dating back to 2000, and found that North Carolina rated 35th. Similarly, the Kauffman Foundation has created their “Index of Entrepreneurial Activity,” which measures new business formation across the nation. Kauffman’s report for 2009 ranked NC as being tied with Kentucky for the 12th worst new business startup rate in the nation.
Furthermore, recent employment figures show that North Carolina’s job market has suffered greater losses during the recession than most states.
Looks like the Tax Foundation and SBEC rankings are much more closely aligned with actual business performance and results than the Forbes and Site Selection lists.
Ah, data … what an interesting thing.
I’ll pull some data that I referred to in your other highly-misleading post — namely, the .xls file found here: http://www.nccivitas.org/media/publication-archive/policy-brief/ranking-north-carolina-s-21st-century-job-growth (again: YOUR friggin’ data).
NC’s tax climate ranking, per the Tax Foundation:
41st
NC’s private sector job loss percentage from the .xls file you used for your report:
-0.8% job growth (or 0.8% job reduction)
A partial list of states (using only neighboring states) that have a “better tax climate,” per the Tax Foundation, with corresponding negative job growth figures (because, well, they’re *all* negative — and WORSE than NC; funny you didn’t bother to mention that):
– SC: #24, -1.1%
– VA: #12, -1.1% (wow! 12th best in the country in “tax climate!” Too bad about that whole “losing private-sector jobs faster” thing)
– KY: #19, -1.8%
– GA: #25, -3.7% (again – wow! Being 16 places higher than NC resulted in … almost 100,000 more jobs lost. Bonus: they were lost from a smaller population, with a conservative Republican governor and conservative Republican legislature. Lucky dawgs, eh?)
– AL: #28, -3.9% (More Republican government; how impressive!)
– TN: #27, -4.1%
– MS: #21, -9.0% (beats NC by 20 places per the Tax Foundation, loses miserably to NC by 13 places in job growth and tens of thousands of jobs lost (82,200 lost in MS, 24,400 lost in NC))
You say, “Looks like the Tax Foundation and SBEC rankings are much more closely aligned with actual business performance and results than the Forbes and Site Selection lists.” Yet the data do not, in any way, shape, or form, show that. By your own calculations, on the page you wrote and then referenced above, we’re outperforming *all* our peer Southeastern states when it comes to jobs.
BTW, the data you point to suggesting we “suffered greater losses during the recession than most states” does not, in fact, show anything of the kind. You may be able to find such data (and, from the figures, it looks probable), but that’s not what the data show. The data show that NC has so far suffered greater percentage losses than the country *as a whole* — which is a number that can be heavily influenced by a few outliers.
The worst part about this? We *need* people like Civitas to provide balance. However, it needs to be balance that includes properly reading statistics, not just providing specious talking points for one side or the other.
Even more fascinating is when you read the Tax Foundation 10 Worst list (we’re #41 on that list).
Comparing that list with your “Ranking North Carolina’s 21st Century Job Growth” information (report, with link to .xls file, still located here: http://www.nccivitas.org/media/publication-archive/policy-brief/ranking-north-carolina-s-21st-century-job-growth), you find something fascinating:
The 10 Worst per Tax Foundation (p. 5 of the report), with their Jan ’00-Jan ’10 job growth (or negative job growth; ** denotes state with a more negative job growth than NC, ++ denotes state with better job growth than NC; note that all states rank worse than NC per Tax Foundation):
41: NC, -0.8%
42: RI, -0.6% ++
43: MN, +3.9% ++
44: MD, +7.1% ++
45: IA, +2.4% ++
46: OH, -9.2% **
47: CT, -2.5% **
48: NJ, -1.4% **
49: CA, -2.9% **
50: NY, +1.7% ++
Note that, out of the 9 states that the Tax Foundation ranked below NC, *four* of them had job growth during the Jan ’00 to Jan ’10 period, and another one (RI) lost a lower percentage of jobs than NC.
Note also that the worst state in the union per the Tax Foundation, good ol’ New York, was also in the top half of states for job growth (as were #s 43, 44, and 45).
I’m going to go out on a limb here and guessing there’s essentially zero correlation between the Tax Foundation figures you provided and the job growth percentage figures you provided. Remind me again about how the Tax Foundation figures are so awesome?
Twicker,
As someone interested in causation, explain to me how higher tax rates transalte into superior job growth (all else held equal)?
1) It doesn’t, *all else held equal.*
2) BTW, the Tax Foundation’s numbers aren’t just based on the corporate tax rate, so your question avoids the issue of whether we should pay attention to the Tax Foundation rankings (just like it would avoid the issue of whether we should pay attention to the Forbes or Site Selection rankings).
3) In the real world, all else isn’t equal — hence my problem with analyses that assume that all else is held equal. “Ceteris paribus” is useful in teasing out main effects, but fails (sometimes dramatically) when you have large effects from mediators/moderators.
So you admit that higher tax rates hinder economic growth? Good.
BTW, nobody made any assumptions about all else being equal. I never said that the TF rankings only include corporate tax rates. Stop making stuff up.
Do you have a point to make with all of your comments or not? If you do, you are doing a poor job making it.
Re: making stuff up: You’re correct to call me on whether or not you said all else was equal (except when you mention it in your question about causation). And you’re correct that you didn’t mention corporate tax rates; that’s a mea culpa. My apologies.
I will mention, though, that I also didn’t say anything about higher taxes = higher growth, so I’m not sure I’m the only one guilty of making stuff up. Maybe you asked me to explain the supposed relationship because you thought I did not believe it?
As to my point, it’s simply that I guess I’m unsure as to what your definition of “business climate” is. I’ll freely admit that, at least in this post, you do not actually say that you believe in the Tax Foundation or SBEC rankings, though you do claim that they, “are much more closely aligned with actual business performance and results than the Forbes and Site Selection lists.”
Unfortunately, I don’t see any evidence for their having a better relationship. The only evidence that you’ve provided is the relative rankings of NC in your job growth data v. the TF ranking & SBEC ranking — and we’ve already seen that, at least for NC and our neighbors, there’s no relationship (or the relationship is negative, meaning better TF/SBEC rankings result in more job losses — kinda bizarre, and I assume not the argument you’re making). As I said, I guess I’m unsure as to what your definition of “business climate” is, or what exactly your point is about the TF and SBEC ratings. What leads you to think they’re valid (again, given the relative positions in job growth in NC and its neighbors)?
If you want to understand what the Tax Foundation means by their “business tax climate,” you can read the report for yourself:
http://www.taxfoundation.org/files/bp60.pdf
I’ve addressed other concerns in the “welfare queen” thread.
Done read the report; thanks. Moving to the other thread (after I get some real work done) …