Profile on states: high taxes = high hopes
What's the very best place to run your business? According to a report released yesterday, look for states with high taxes, high wages, and low unemployment. Shun states with low taxes and throngs of low-paid workers looking for jobs.
The ``report card'' by the Corporation for Enterprise Development stands conventional wisdom on its head.
Massachusetts, Connecticut, Minnesota, and New York will love this report. (Of course, Massachusetts loves all economic reports these days, as presidential hopeful Michael Dukakis is well aware.) These states scored A's and B's on each of the measurements: economic performance; business vitality (competitiveness and the ability to spawn new businesses); economic capacity (the ability to grow a business with an educated work force and good infrastructure, for example); and government policies. For Alabama and Tennessee, which received four F's, the report will only add to the pile of bad news already burying the states.
What the study did was look favorably on long-term investments in a state's economy - government spending on education and infrastructure - rather than penalize the state for the high wages such investments require. It counted a highly paid, educated, and employed work force as a plus, since such a work force provides a better foundation on which to build a company.
``We will compete in this new global economy not by the poverty of our wages, but by the quality of our minds,'' says Robert Friedman, who prepared the report.
Here's how the study ranks the different regions.
New England and the Northeast rank at the top of every measurement. They have benefited not only from their dominance in information-age industries, but also from their long-term investments in education. The high taxes in these states are offset by the benefits of good infrastructure, government participation in helping start-up companies, and farsighted government policies.
The Midwest fares worse in economic performance in the face of competition from low-wage countries like Brazil, Taiwan, and South Korea. These problems have forced the ``rust belt'' to restructure, and this restructuring is already reaping economic benefits.
The South is at the bottom of the list by almost every measure. Economists fault the South's short-term strategy of attracting plants from other states with low wages and low taxes. Yet these states find themselves competing with the likes of South Korea, and they are losing. The silver lining is the commitment that some Southern states have made to improving their educational systems and infrastructure.
The Rockies and the Plains are muddling along, but the future is not bright. With their low population and small manufacturing sector, they have not needed much in the way of development and have not done much.
The West, specifically California, ranks at the top of the list. California has most of the same assets as New England.