Creating a Good Business Climate: The Facts.
an House Finance, Ways and Means Committee meeting during the last big tax debate,
one legislator asked the Economic Development Cabinet spokesperson why North
Carolina is out-competing Tennessee in recruiting new businesses even though
they have higher taxes overall and a personal income tax to boot.
One of the reasons stated was North Carolina's excellent
educational system and a university system that is one of the best in the nation.
Tennessee on the other hand ranks 49th in education spending per capita and
48th in high school graduation rates. The simple fact is, education of
the local work force is more important to recruiting new business than having
Creating Jobs in Tennessee
Following is a summary of a study by Dr. Robert G. Lynch, an economics
professor at the State University of New York. Click
here to see Dr. Lynch's latest report published by the Economic Policy Institute.
Many of the findings are very relevant to the current discussion
in Tennessee. The major findings of hundreds of survey studies can be
summarized as follows:
While the benefits of tax cuts and incentives are debatable,
their costs are clearer:
- There is no evidence that state and local tax cuts,
when paid for by reducing public services, stimulate economic activity or
- There is little evidence that the level of state and
local taxation figures prominently in business location decisions.
- State and local business tax incentives and financial
inducements are not the only, or even the primary, influence on business investment
- Factors such as the cost and quality of labor, the quality
of public services (schools, roads and highways, sewer systems, recreational
facilities, higher education, health services, etc.), the proximity to markets,
and the access to raw materials and supplies are more important than tax incentives
in business location decisions.
- There is little evidence that job losses or job transfers
from one state to another are a consequence of business tax incentives.
- Tax cuts and incentives cause state and local governments
collectively to lose billions of dollars annually in tax revenues.
- Because of the lost tax revenues, tax incentives force
state and local governments to cut back on the quantity or quality of public
- These reductions can damage the economy because businesses
often need these public services to thrive. Indeed, there is evidence
that state and local tax cuts, accompanied by reductions in public services,
cause job loss and economic decline.
If Tennessee is serious about recruiting new business and
fostering the development of home-grown businesses, then it should invest in
the development of a top-notch education system and other services that increase
the overall quality of life for every Tennessean.
Tax reform gets 2 BIG boosts from business community in