2018 Best And Worst States For Business Poll Sends Clear Signals

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For the past 14 years, Chief Executive magazine has conducted a survey of CEOs to rank the Best and Worst States for Business. Factors such as tax and regulatory environment, cost and quality of talent and quality of place are ranked by state in order to arrive at an overall ranking.

While the rankings do not completely tell the story of every state, they do provide insight into the perceptions of the C-suite when it comes to issues that impact site selection decisions. This year's rankings were released in early May.

BOTTOM FIVE STATES TO DO BUSINESS IN

The bottom five states in the survey have high tax rates and an overall high cost environment for businesses and residents alike. In addition, these states have historically struggled with debt, unfunded pension liability and crumbling infrastructure. Below are the states that rank at the bottom for 2018:

50. California continues to rank at the bottom for taxes and regulation.  The state has enjoyed a reduction of its unemployment rate from 12.1% to 5.2% in the last seven years, but still lags the national unemployment rate.

49. While known for its talented workforce, New York continues to have a very high cost of living and its tax and regulatory environment continues to rank at the bottom nationally.  In addition, the high cost of real estate and poor infrastructure impacts the state’s ranking.

48. Illinois has a great central location and has grown foreign direct investment, however, its tax and regulatory environment, overall operating costs and inability to pass budgets on a regular basis, continues to keep this state ranked at the bottom of the list year after year.

47. With poor rankings in living and tax and regulatory environment, New Jersey has some work to do in order to improve its ranking.  The state’s higher education system is regarded as one of the best in the country and its strength in life sciences creates potential opportunities in the future.

46. Connecticut has poor rankings for tax and regulatory environment, overall fiscal health and infrastructure quality. As a result, several companies have moved their operations out of the state. This includes prominent corporate headquarters, such as General Electric.

TOP FIVE STATES TO DO BUSINESS IN

The top five states in the rankings represent locations that have earned high marks for economic development for many years. The group is once again led by Texas. Texas has ranked in this survey’s top position for more than a decade. There are several things these top five states have in common; their leadership understands the importance of having a good tax and regulatory environment, a track record of investment in infrastructure and talent, and professional economic development officials at the local, regional and state level.

Texas does not have corporate or personal state taxes and possesses an attractive regulatory environment. In addition, its’ fast growing talent pool, supported by a large number of higher education institutions, positions the state for continued success. The state has also continued to invest in infrastructure (rail, port, air and roads).

Florida is considered to be a very good place to do business. As a result of tax and regulatory reform, the state’s business climate has continued to perform.  Like Texas, Florida’s fast growing talent pool is supported by outstanding higher education institutions. Creative solutions to infrastructure projects, such as toll roads and public-private partnerships, have also resulted in successful economic development.

North Carolina ranks very high when it comes to a great business climate and quality of place assets. The state has also continued to diversify its economic base and grow its talent pool. North Carolina’s investments in infrastructure and higher education have also paid dividends.

Tying for third with its neighbor to the north, is South Carolina. The state has a great business and regulatory climate and they adopted the South Carolina Innovation Plan in January 2017. This plan focuses on growing the state’s manufacturing, life sciences and computer software industries by developing its talent base.

Indiana is well known for all of the positive changes made to its business and regulatory climate. The state’s Regional Cities Initiative partnering with local/regional government and private & philanthropic organizations to invest in quality of place assets has already paid dividends.  Investment in statewide infrastructure projects has leveraged significant private investment.

It is evident that CEOs surveyed in the Chief Executive magazine poll are sending a clear message. Taxes and regulations matter, but so does talent, quality of place and infrastructure. We have transitioned to a point in time where the least expensive location is not always the best location. A state must be competitive in terms of cost, but also demonstrate that it has the right talent and infrastructure to support businesses and residents alike.

Larry Gigerich serves as Executive Managing Director of Ginovus.

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