2020 Best States for Business: Bring Me (mostly) the Usual Suspects

Chief Executive magazine does a survey every year of the best and worst states for business. This isn’t just a list about taxes, but includes other factors; still, it’s a good survey of what business executives look at. The top ten includes my home:

  1. Texas
  2. Florida
  3. Nevada
  4. Tennessee
  5. Indiana
  6. North Carolina
  7. Arizona
  8. South Carolina
  9. Ohio
  10. Utah

The bottom ten has a couple of surprises (for me):

41. Alaska

42. Hawaii

43. Oregon

44. Washington

45. Massachusetts

46. Connecticut

47. New Jersey

48. Illinois

49. New York

50. California

That Texas is at the top isn’t a surprise. “Employers continue to be attracted by the state’s lack of an individual income tax, low business taxes, friendly regulators, a reasonable cost of living, and diverse and growing labor force.” [emphasis added]. Contrast that with California: ” Business owners—especially companies that make things— continue to abandon the state as fast as they can.”

I was surprised by Alaska and Washington. Neither state has a state income tax. Alaska, of course, is hard to get to, and the cost of living is a big issue. In Washington state, it appears that the cost of living and regulations lower the ranking.

I wanted to emphasize the impact of regulations. Regulations are hidden costs for businesses. It’s not that all regulations are bad (that’s absolutely not the case); rather, over-regulations cost business money. Consider a widget manufacturer in Los Angeles. He’ll face California’s burdensome regulations at the state, county, city, and regional level (the air quality district regulates). Here in Nevada, there are state and local regulations, but they’re integrated without the quadruple level of regulations. I read years ago it took Carl’s Jr. (a fast food chain) over a year to get regulatory approval to build a new location in California; it took less than two months in Texas.

In good times, California has prospered because of the entertainment industry and Silicon Valley. We’re not in good times right now, and the budget hit to the Golden State is severe (they’re projecting a $54 billion deficit). Sure, Covid isn’t the fault of California (or any other state). But the reaction of the legislature demonstrates that they’re not learning anything: Increase taxes and hope for a federal bailout (one that I doubt is coming).

For those who think that state policies don’t matter, this survey tells you otherwise. The states at the top (run by Democrats or Republicans get this). The states at the bottom mostly don’t.

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