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Northeast strives to shed its anti-business reputation

If you didn't know better, you might still see Massachusetts as a bastion of liberalism - a state so traditionally left-leaning that it alone voted for George McGovern in the 1972 Nixon landslide.

But as outgoing Gov. Edward J. King, a conservative Democrat, looks back over his four-year record, what makes him most proud? His probusiness record.

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''We've cut income taxes twice, 1979 and 1982,'' he says, sitting in shirt sleeves in his large corner office in the state capitol. Ticking off the ''successes'' of his term, he includes yearly cuts in capital-gains taxes, two cuts in unemployment taxes and excise taxes, and cuts in property taxes in three of his four years. ''I'm for profit,'' he adds.

He is not alone in the Northeast. In one of the most far-reaching but least noticed political turnarounds in the history of the 11-state region (New England , New York, New Jersey, Pennsylvania, Delaware, and Maryland), state legislatures and administrations are racing each other to establish what Pennsylvania's secretary of commerce, Geoffrey Stengel Jr., describes as ''a positive, predictible, and competitive climate for job and business growth.''

They are fighting a deeply rooted reputation: that their region has some of the highest taxes, costliest social services, stiffest regulations, and most antibusiness attitudes in the nation. Over the years, observers say, the business-exists-so-that-we-can-tax-it attitude helped drive investments elsewhere - especially to the Sunbelt states.

But in the past several years, commerce departments up and down the corridor have been echoing Mr. Stengel's assertion that ''we basically want to stay out of the way of the private sector.''

''Born-again capitalists'' is the way the region's political leaders are described by Dr. James M. Howell, senior vice-president and chief economist of the First National Bank of Boston. He says the ''dramatic shift in the attitudes of elected leaders'' has been especially noticeable since the mid-1970s.

Before then, says New York investment banker Felix G. Rohatyn, ''we took a kind of Ivy League approach to the world - we just sat back and admired our factories and financial institutions.'' The assumption was that businesses would continue to locate in the Northeast, as they had since the Industrial Revolution. ''The industrial Northeast never had to advertise,'' adds Joseph F. DeFuria, a development manager for the Public Service Electric & Gas Company in Newark, N.J.

But the 1975 recession - and aggressive advertising from the Sunbelt states, where taxes, energy costs, and wages are often lower - jolted the Northeast out of its Yankee reserve.

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Among the more visible signs of this turnaround:

* Most significant are the legislative changes. The New York Legislature has cut the top rate of personal income tax from 15 percent to 10 percent (on the way, state officials say, toward 5 percent), and has passed some 75 probusiness pieces of legislation this past year alone.

Pennsylvania has repealed a law requiring a 90 percent prepayment of business income taxes. New Jersey has reorganized and upgraded its Department of Commerce and Economic Development, and Gov. Thomas H. Kean has promised to veto a recent proposal to increase in the personal income tax rate.

Similar changes are sweeping through the other states as well. Maryland and Connecticut have eliminated sales taxes on manufacturing machinery. Delaware has cut its top rate of personal income tax from 19 percent to 13.5 percent. Rhode Island has just finished rewriting its workmen's compensation laws in ways more favorable to business. Maine will shortly be announcing major new programs in public facilities, job-training, and river development and hydropower projects. New Hampshire has amended its industrial revenue bonding legislation to allow financing of commercial (as well as industrial) projects. And Vermont has given local communities (through their town meetings) the right to work out tax-stabilization agreements with incoming businesses.

Most observers see the trend continuing. Democratic Govs.-elect Mario M. Cuomo of New York and Michael S. Dukakis of Massachusetts are expected to continue in the probusiness directions set by their predecessors. In New Hampshire, Republican John Sununu won after pledging to veto any attempts to levy state personal income taxes or sales taxes.

* A number of states are mounting slick advertising campaigns. Governor King has promoted the ''Make it in Massachusetts'' bumper stickers. New York, broadening its original ''I love New York'' tourism promotion, has budgeted $4.3 million for its new ''Made in New York'' campaign.

''You've got a friend in Pennsylvania'' is the Keystone State's slogan. Maryland runs full-page advertisements picturing a carrot with the words: ''The incentives have never been bigger.'' Rhode Island has songs plugging ''The biggest little state in the Union.'' And New Jersey, a relative late-comer in the game, is actively seeking a slogan.

* Backing up these campaigns in every state are increasingly sophisticated industrial development authorities (IDAs). They are designed to woo domestic and foreign industrialists into the state - and to ensure that manufacturers already there stay and expand. Pennsylvania, for example, operates five overseas offices and maintains 127 local IDAs. New York has just hired 29 young MBAs to provide closer ties between the government and the state's manufacturing firms. ''The major activity has been in retaining what we have,'' says William E. Redmond, executive deputy commissioner in New York's Department of Commerce.

The result of these efforts, says David D. Arnold, executive director of the Policy Research Center of the Coalition of Northeastern Governors, will not be a ''smokestack-chasing mentality.'' He sees increasing emphasis on small business and high-technology enterprises.

Next: Can corridor states cooperate with each other?

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