CLEVELAND, OHIO — November 11, 2005 — The state of Texas finished No. 1 in Expansion Management Magazine’s annual Legislative Quotient TM rankings, replacing Nevada, which fell to the runner-up spot. Rounding out the top five are Wyoming, Arkansas and Iowa. Rounding out the top 10 are Arizona, Florida, Washington, Tennessee and Georgia.
Expansion Management Magazine, a monthly business magazine for executives of companies that are actively looking for a place to expand or relocate their facilities within the next one to three years, recently published its 11th annual “Legislative QuotientTM” ratings.
“Politicians have a tendency to take credit for economic success for which they had little or nothing to do with,” said Bill King, editor and associate publisher of Expansion Management. “What a business needs to focus on are things like who pays the taxes, and how much to they pay? Does government spend within its means or is it standing in line ahead of your business soaking up most of the bank’s loan dollars? Are tax rates going up or down? How about spending? Are they mortgaging your businesses’ future by racking up huge deficits, and then requiring you to pay for it at increasingly higher tax rates? Those are the important issues that effect business, not the hot-button social issues.”
Expansion Management magazine is mailed to more than 45,000 CEOs, vice presidents, directors and other officers of companies that have indicated they are considering expanding into new geographic areas.
“Tax issues may not make or break your site location decision, but it’s good to know how state legislatures handle their — and your company’s — money,” said King. “You want as complete a picture as possible of your prospective site.”
All governments collect taxes. After all, roads, schools, police and fire protection all cost money. The Legislative Quotient looks at how state governments collect their taxes, and how they spend the money they collect. If a state is spending most of its budget on items like education and roads and a minimum on government administration, that could say a lot about that state’s priorities. If this is a state that makes a commitment to education and infrastructure, that means it’s investing in its, and your, future. If a state is putting off improvements to its infrastructure, that could be a warning sign.
“An expanding company needs to know if the prospective state government is living within its means,” said King. “If not, it usually means one of two things will happen: taxes will go up, or services will go down; neither prospect is particularly good for your company.”
Trends are important, too. Tax rates, debt service, and spending represent a snapshot in time. That’s why the LQ compares those areas against what they were five years earlier.
“Look at taxes five years ago and compare them to today’s rates,” said King. “Look at businesses’ share of the overall tax burden. Is the state shifting its revenue sources toward, or away from, the business community?”
One area we no longer look at is whether or not a state has a legislative or constitutional mandate for a balanced budget. That’s because, while a governor may be required to submit a balanced budget, the legislature may not be required to pass a balanced budget, and that same governor also may not be required to sign a balanced budget. After all, when it comes to politics, nothing is ever exactly what it seems to be.
To read the 2005 Legislative Quotient article, “Is Your State Keeping its Financial House in Order?” visit Expansion Management’s Web site at www.ExpansionManagement.com and look under RESEARCH STUDIES.
Means the article is accessible only to our magazine subscribers.
