It Pays To Be Out in Front

his year’s edition of State of the States, in addition to containing updated legislative, demographic and education data, includes the second installment of six Rankings That Matter: estimated 2013 GDP (BEA); the Tax Foundation’s 2015 State Business Tax Climate Index (Oct. 2014); the Small Business & Entrepreneurship Council’s Small Business Policy Index 2014 (Dec. 2014); total ACT National Career Readiness Certificates earned, as of Oct. 2014; Incentives Transparency Index 2014 rankings from Amsterdam-based Investment Consulting Associates (ICA); and four-year high school graduation rates.

Our new ranking from ICA comes from a proprietary database the firm maintains, and encompasses incentives deals between Jan. 2010 and Nov. 2014. Michigan is No. 1. For this time window, a total number of 8,750 incentives were awarded by all 50 US states, generating 1,126,479 new jobs and attracting $307.5 billion in capital investment.

“We’re finding clawback provisions with a lot of teeth to them,” says Martin RomittI, senior vice president at the Center for Regional Economic Competitiveness (CREC). That said, “It’s also hard to structure a clawback that covers every eventuality,” says Ellen Harpel, founder of Smart Incentives and president of Business Development Advisors. “We are seeing stronger rules, but the more effective ones are up front, rather than after the fact.” That same approach applies to taxes. “Lawmakers create these deals under the banner of job creation and economic development,” says the Tax Foundation, “but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business tax climate.”
— Adam Bruns

Data sources include: EASI Demographics; Tax Foundation; ACT Investment Consulting Associates; BLS; BEA; NBER; Census Bureau; Conway Data; state chambers of commerce, economic development agencies and associations; press reports; governors’ press rooms; law firms; and legislative documents.