As I wrote here a year ago, this comparison “measures the states by their own standard: the selling points they use to attract business. We separate those pitches into the ten categories, which are then weighted in the study based on how frequently the states use them as selling points.”
Most business climate comparisons rate states based not on the seller’s perspective, but the buyer’s — that is, the perspective of businesses that have to deal with the tax and regulatory structures of each state, as well as the other things that go into a state’s share of the U.S. economy. The “buyer” is the one deciding to do business, or not, in a specific place, but it’s interesting to see how a state does what it claims to do, or be good at doing.
Wisconsin ranked below Minnesota (11th), Iowa (12th) and Indiana (14th), but ahead of Ohio (25th), Illinois (26th), Missouri (27th) and Michigan (33rd). Wisconsin also got closer to the three Midwestern states ranked better than Wisconsin while leaping over Missouri, which are positives.
Wisconsin’s 17th ranking is the sum of ranking 15th in cost of doing business, 43rd in workforce, 14th in quality of life, sixth (up from 22nd) in infrastructure and transportation, 34th (down from 22nd) in the economy, 10th in education, 20th in technology and innovation, 27th in business friendliness, 27th in access to capital and 23rd in quality of life.
CNBC explains the economy ranking thusly: “A solid economy is good for business. So is a diverse economy, with access to the biggest players in a variety of industries. We looked at basic indicators of economic health and growth.”
That suggests (besides being merely top third now overall) that a lot of work still needs to be done by the Walker administration and the Legislature. The corporate income tax rate of 7.9 percent gives Wisconsin (when added to the federal corporate income tax rate) one of the highest corporate income tax rates in the world. The 7.75-percent personal income tax bracket affects every owner of a subchapter-S corporation. As for “access to the biggest players in a variety of industries,” just nine of the S&P 500 has operations in this state.
The economy ranking also shows that state government did not do enough in 2011 to improve the state’s economy. Replacing the Department of Commerce with the Wisconsin Economic Development Corp. was only a start. Appointing more business-friendly administrators across state government was only a start. Creating job-creation tax credits doesn’t cost state government money if no jobs are created, but businesses don’t make job creation decisions based on job tax credits.
As for the workforce ranking, “We rated states based on the education level of their workforce, as well as the numbers of available workers. We also considered union membership. While organized labor contends that a union workforce is a quality workforce, that argument, more often than not, doesn’t resonate with business. We also looked at the relative success of each state’s worker training programs in placing their participants in jobs.”
That sentence about unions and business makes one wonder if a brave legislator can be found to introduce a bill banning closed shops in Wisconsin. The educational level measure is also interesting given that there are a lot of college-educated people among the unemployed today.
I’m not going to mention further the improvements in rankings, because this blog doesn’t exist to be a cheerleader for this state or for Gov. Scott Walker or Republicans. Wisconsin was ranked in the top five in no area. An eight-position overall jump didn’t warrant inclusion on CNBC’s list of most-improved states. Even Walker’s congratulatory news release admits:
“This improvement in our ranking shows we are on the right track,” Governor Walker said. “We’ve made great strides in improving the business climate in the state over the past year and a half, but there is more work to be done.”
There certainly is. For one thing, legislators need to create a mechanism to essentially prevent taxes from increasing in the way that Walker’s predecessor and the 2009–10 Legislature increased taxes. Everyone whose fingerprints are on those tax increases is directly responsible for Wisconsin’s poor business climate rankings up until the past year, because while business climate comparisons differ in what they measure and to what extent, every single one of them prominently includes taxes.
Does that require a Taxpayer Bill of Rights? A supermajority requirement or voter referendum to increase taxes? Do them all, as far as I’m concerned.
To finish in the top third among the states is better than finishing in the middle. (And it’s certainly better from the state’s 37th ranking in 2008.) But 17th isn’t nearly good enough. State government’s goal should be for the state to finish number one in the Midwest and, at a minimum, in the top five nationally, regardless of the business climate comparison.