Florida No. 2 in list of best states for business in U.S.

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In the list of U.S. states that are best for business, Florida is number two — with a bullet.

More than 500 CEOs across the U.S. took part in the 10th annual survey by ChiefExecutive.net to determine which states were the best and worst for business.

Texas continues its 10-year streak as the best overall state, but Florida ranks No. 2, edging up — and even surpassing — the Lone Star State in quality of living.

The study based state rankings on a variety of “critical measures” including tax and regulatory administration, quality of both workforce and living environment. A state’s attitude toward business, for example, was an essential component of its tax and regulatory regime; employee attitude toward management was also a crucial factor in the apparent quality of the workforce.

Public education and health were other factors used to determine the living conditions, as well as the cost of living index and affordable housing.

 “We’ve learned from Texas how to tell our story better and it helps that we’ve cut taxes 25 times—about $400 million,” Florida Gov. Rick Scott told Chief Executive Magazine.

Scott points to the momentum of big name companies investing in Florida, something referred to as the “flywheel effect.”

“When companies like Hertz, Amazon, Deutsche Bank and Verizon add jobs here,” Scott said, “it causes more people to look at us. Business is comfortable that we’ll keep the tax base low and improve our workforce.”

California, New York and Illinois continue to be positioned among the worst states for business in 2014, with little change from previous years.

John Hood, president of the North Carolina think tank John Locke Foundation, cites a number of academic research studies comparing tax policies.

Hood pointed out 112 studies examining regions with high state and local tax burdens, discovering that 64 percent—72 in all — had a negative association with economic performance.

Critics of the study counter that isolating high taxes, among other specific variables, misses the point. They argue that the tax burdens are for “investments” in education, infrastructure and other government programs.

Hood admits that it seems plausible in theory, but in reality, it never works out that way. In 43 research studies on the correlation between economic growth and overall state and local spending, only five established a positive role, with 16 finding a negative correlation. The remainder was inconclusive.

One problem is that states rarely invest effectively; where Texas, Florida, Tennessee, North Carolina and South Carolina, Indiana and others have caught on to the secret recipe — that economic freedom works.

Economists who determine the Fraser Institute Economic Freedom of North America index inspected state economic growth between 1981 and 2009.

Their conclusion was that if a state adopts fiscal and regulatory policies adequate to improve economic freedom scores by a single point, unemployment can drop by as much as 1.3 percentage points, with a rise in labor-force participation by 1.9 percentage points.

This begs the question why lower ranked states have not acted on this data.

The answer is complicated having to do with the balance of power and control. States will always have leaders certain they are acting with superior knowledge and insight, and such ideology will have its devotees.

However, business leaders and citizens are not limited to follow such delusions—and could continue to vote with their feet (and dollars) by moving to states with environments friendlier to business.

 

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.