The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

August 4, 2008

We’re number 43!

Three weeks ago, released its survey on states as places to do business, in which Wisconsin ranked 37th.

Forbes magazine has now issued its ranking of states as places to do business. And Wisconsin doesn't rank 37th. Wisconsin ranks 43rd, behind, in the Midwest, Minnesota (11th), Iowa (22nd), Indiana (25th), Missouri (30th), Illinois (35th) and Ohio (39th) and ahead of only Michigan (47th). Virginia ranked first, followed by Utah and Washington; West Virginia ranked last.

Forbes' rankings are based on business costs, as in costs of labor, energy and taxes; labor, including educational attainment, net migration and projected population growth; the regulatory environment, including the regulatory and tort climate, incentives, transportation and bond ratings; the economic climate, based on growth in jobs, income and gross state product, unemployment rates and the presence of large companies in the state; growth prospects, forecasts of the future economic climate (in Wisconsin's case, gross state product growth of 2.1 percent is predicted, which ranks Wisconsin 41st); and quality of life, an index based on schools, health, crime, the cost of living and poverty rates.

Wisconsin got to 43rd by ranking 37th in business costs, labor and regulatory environment, 26th in economic climate, 46th in growth prospects, and 16th in quality of life. (Note, under regulatory environment, the words "bond ratings," of which Wisconsin's has been steadily falling due to our budget messes.)

The and the Forbes rankings are consistent in cost of doing business (37th from Forbes, 36th from Wisconsin ranks better in Forbes' eyes in our economic climate (26th) and in quality of life (16th) than in's eyes (36th and 25th, respectively); even though the economic climate measure isn't an apples-to-apples comparison, the comparative rankings to other states are instructive. When you rank 46th in growth prospects, it's clear Forbes isn't bullish about your state.

One significant part of Forbes' ranking has to do with a Pollina Corporate Real Estate ranking of "states’ efforts to be pro-business ... limited to factors over which state government has control." The list shows only the top 10 (North Carolina is number one; no Midwest state is on the list), so we can't tell where Wisconsin fits on this list, but you can draw your conclusions from Wisconsin's lack of executive summary mention and from this:
The list reflects state leadership that truly understands the importance of producing the best job opportunities available for their constituents. The state governments at the top of the list understand that they must be very pro-active in the international battle to keep and attract jobs.

The way that business is conducted in this century is significantly different than it has been in the past. The question is: How is American business and government adapting to these economic realities?

"Our clients are under constant pressure from national and international competitors to be as economical and efficient as possible and often post the question to us: If we are to keep our operations in the U.S., which states have the most pro-business climates?" said Brent Pollina Esq.

The Pollina Corporate Top 10 Pro-Business States were selected based on those factors that are most important to corporate executives and can be controlled by a state's political leaders.

"Each of the Top 10 Pro-Business States has something to learn from the others and all 10 should be held up as models for the other 40 states and the federal government," said Mr. Pollina.

Wisconsin's leaders may understand "the importance of producing the best job opportunities available for their constituents," but it's not clear they know how to produce the best job opportunities available for their constituents. Wisconsin has a number of tax credits (Assembly candidate Jo Egelhoff lists "higher education tax credit, early stage investment credits, research and development credits and investment tax credits"), but we still have one of the highest corporate income tax rates in the nation, high property taxes, and a state Department of Revenue that likes to assess sales taxes on corporations that legally don't have to pay them. (More on that Tuesday in this space.) Wisconsin's low ranking also shows that other states are more aggressive in tax and other incentives, which Pollina identifies as "tax breaks, job training, free land, subsidized rent, free infrastructure, forgivable loans and numerous other creative forms of assistance."

Moreover, Pollina points out, "State financial incentives are often confusing and difficult for most companies to access. Most industry experts agree that most companies, when relocating, expanding or consolidating facilities in the U.S., receive only 10 to 15 percent of the incentives that are potentially available to them. This is the case even among the largest corporations. Companies must know what to ask for, whether they will qualify for programs and what the true value of programs are. It is a negotiation process, and those who know the programs, the states and how to extract the assistance receive the most benefits."

It would be easier to attract businesses here if we could tell prospective businesses that a business doesn't have to worry about compliance with corporate taxes, because we have none, instead of sticking them with a big tax bill and then advice on applying for this or that tax credit. Instead, our elected officials are more afraid of what the teacher's union or the public employee unions would say at the thought that businesses and their employees do a whole lot more good in this state than public employees do. It also appears, based on the way these rankings were compiled, that touting our (supposedly) great schools and quality of life matters much less to businesses not in this state than how much doing business in Wisconsin will cost them.

I'll repeat what I said in this space three weeks ago: Someone must point out that, compared with the states with which we are competing for business — including keeping the businesses we have here from leaving — Wisconsin has barriers to business vitality, economic prosperity and wealth creation, and if we ever expect sustained and sustainable improvement in our state's economy, we need to eliminate those barriers, particularly on Election Day.

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