published Thursday, May 19th, 2011

Business-friendly Tenn., Ga.

It’s no accident that some states attract business investment while others drive it away.

Of course, there are some chance factors — such as pleasing scenery or a mild climate — that may work in a state’s favor when it tries to recruit a company. But it takes more than that to make a state really business-friendly.

Tennessee, for instance, has benefited from its determination to avoid a general income tax. The Volunteer State also has refused to go down the path of excessive regulation, which has killed industry in other states. Tennessee also maintains a balanced budget, even when it’s difficult.

Georgia, too, has kept taxes, spending and regulation low in comparison with most other states.

So it is no surprise that a survey of 550 CEOs around the country placed both Tennessee and Georgia among the five best states to do business.

Chief Executive Magazine ranks Texas as the very best state in which to do business, followed by North Carolina and Florida. Tennessee comes in fourth, and Georgia is fifth.

Tennessee’s workforce earned high ratings, as did the state’s quality of life. Tennessee also has a lower percentage of state and local government workers than most states, and the lowest amount of state government debt per resident. Georgia’s workforce and quality of life are strong, too, and Georgia also has low debt and a low percentage of government workers.

At the other end of the spectrum, big-spending, high-taxing California has the worst business climate, followed by New York, Illinois, New Jersey and Michigan.

“Not surprisingly, states with punitive tax and regulatory regimes are punished with lower rankings ...,” the magazine noted. Companies are seeking “areas with consistent policies and regulations that allow them to plan, as well as intangible factors such as a state’s overall attitude toward business and the work ethic of its population.”

It also is not just a coincidence that the five states with the best climate for business are “right-to-work” states — where workers can’t be forced to join or support a union. The least business-friendly states are those that are not right-to-work states.

Tennessee clearly has reaped rewards from its low-tax, low-regulation policies. A recent example is the decision by Volkswagen to locate a manufacturing plant in Chattanooga.

California, by contrast, has destroyed its auto industry over the past couple of decades through heavy environmental regulation and high taxes.

Tennessee, Georgia and other states that rely on the creativity and industry of their people, and avoid excessive government intrusion in the free market, are lighting the path to economic growth.

Wouldn’t it be wonderful if our federal government would follow that model?

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