NC Budget and Tax Center

NC’s business climate depends on which ranking you look at

It is becoming ever clearer that recent tax cuts have not endeared North Carolina to the entire business community. Proponents of the 2013 tax cuts argued that they would create a more competitive and business-friendly climate. Looking at recent business climate rankings, however, undermines this argument in two key ways.

First, multinational corporations already liked North Carolina just fine before the latest tax cuts. Second, the tax cuts have undermined our economic competitiveness in other important areas.

The 2014 Top Competitive States ranking by Site Selection, in which North Carolina is ranked #1, suggests that the tax cuts worked. However, North Carolina has consistently been at or near the top of the Site Selection rankings for a decade, including being #1 in some years prior to the 2013 round of tax changes. This ranking is largely based on the level of private capital investment a state secures, the number of jobs created, and a state’s tax climate – as determined by the conservative Tax Foundation. Essentially, low tax rates and high levels of capital investments – made possible in part due to generous economic incentives provided to corporations by state governments – benefits a state’s performance in this ranking.

In contrast, CNBC’s 2015 Top States for Business ranking has North Carolina at #9 among states, a drop from a #5 spot last year. This is troubling because the CNBC ranking does not just reflect the perspective of footloose corporations; it considers variables beyond tax rates and private capital investment. Quality of life and education are two particular areas in which North Carolina lags among states in this ranking. Furthermore, the Tar Heel state dropped to 16th (tied with Colorado and New Mexico) from 4th last year in regards to the quality and availability of its workforce, based on this CNBC ranking.

Of course, taxes are not the only thing businesses look to when deciding where to locate. An attractive quality of life, well-functioning transportation networks, high-quality public schools, and a skilled and educated workforce, among others things, all contribute to the success of businesses. All of these pieces of the puzzle fit together to create a competitive and attractive business climate. These pieces require support from all stakeholders, including the public and private sectors, to ensure that North Carolina is a desired place to raise a family and operate a business.

Rankings aren’t the best way to assess the quality and health of a state’s economy and its people. State policymakers, however, play a critical role in ensuring that economic opportunity is broadly shared. A continued focus on cutting taxes at the expense of adequate funding for our schools, public colleges and universities, courts, and healthy and safe communities will make the Tar Heel State less business-friendly for those who seek to come here and those who currently call North Carolina home. As a result, we all lose.

One Comment

  1. LayintheSmakDown

    July 10, 2015 at 9:19 am

    Well this is a no brainer, just like all the “facts” quoted on this web site there are other ways to look at every issue (and in almost every case a more reputable one when it comes to what is quoted here). Statistics are notoriously bad as every group picks and chooses what looks good to them or promotes their narrative of the day.

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