State Rankings as a Tool for Tax Policy in New Mexico Manuel del Valle Director of Research
The World is Flat Again? • Thomas Friedman has just published a book called “The World is Flat.” • “The 20 th Century gave us a platform in which intellectual work can be delivered from anywhere. It can be disaggregated, distributed, and apportioned in many places.” • In this sense the playing is leveled and flat.
US Tax Returns Processed in India • Somebody in India offered Thomas Friedman to do his tax returns. “I already have an accountant in Chicago” he replied. • The Indian accountant was too polite to suggest that Friedman’s tax return might be already being processed in a foreign country, through an outsourcing operation of his accountant in Chicago.
Number of US Tax Returns Processed in India 500 400 Thousands 300 200 100 0 2003 2004 2005
The World Has Also Flattened for States Trying to Attract Investment Fortune Magazine 1955 Fortune Magazine 2002 advertising Indiana advertising Tennessee • Low cost of coal • Commitment to secondary and higher education • Presence of Petroleum, Water, Corn, Soybeans • Expansion of technology infrastructure • Easy access to natural resources • Factors that would retain knowledge workers, • Access to transportation amenities routes • Factors that would help • Enviable strike and lockout entrepreneurial companies record grow
Why Rankings are Useful in a Flat World • Allow the comparison with other states that also compete to attract investment • Provide a diagnosis of a state, and a benchmark • Allow the opportunity to identify best practices • Provide a view of the state from the “outside” • Provide a relief from making policy reforms looking only at domestic issues.
First Ranking: Tax Procedures Published by the Council of State Taxation (COST) looks at issues of fairness and administrative procedures such as the presence and independence of a tax tribunal New Highest Ranking States Mexico Lowest Ranking States Arizona Nevada Kansas North Carolina 28 Missouri Rhode Island South Carolina Connecticut Delaware Texas
Second Ranking: Business Climate Published by the Tax Foundation looks at issues of the level—and to a certain extent the “variance”--of personal, corporate and sales taxes. It also looks at unemployment insurance and fiscal balance. New Highest Ranking States Mexico Lowest Ranking States South Dakota Rhode Island Florida West Virginia 40 Alaska Minnesota Texas New York New Hampshire Hawaii
Third: Government Performance Published by the Maxwell School of Citizenship and Public Affairs at Syracuse University. It is the result of a six year project to examine the performance of governments in issues of financial management, capital management, information systems and human resources. New Highest Ranking States Mexico Lowest Ranking States Utah Hawaii Virginia New Hampshire 39 Michigan Wyoming Kentucky Alabama Delaware California
Fourth: Competitiveness Published by the Beacon Hill Institute. Evaluates the “microeconomic foundations of prosperity” based on a methodology by the World Economic Forum. It looks at issues of fiscal policy, security, infrastructure, human resources, technology, business incubation and openness. New Highest Ranking States Mexico Lowest Ranking States Massachusetts Hawaii Utah Alabama 33 Washington West Virginia Minnesota Louisiana Colorado Mississippi
Fifth: The New Economy Published by the Progressive Policy Institute. Economic success of states depend on technological innovation and entrepreneurship. It looks at variables such as knowledge jobs, presence of IT jobs, educational attainment of the workforce, export orientation, % of population on line, technology in schools and e-government New Highest Ranking States Mexico Lowest Ranking States Massachusetts Wyoming Washington Alabama 27 California Arkansas Colorado Mississippi Maryland West Virginia
Are These Rankings Correlated? Business Government Competitive- New Procedures Climate Performance ness Economy Procedures -0.10 0.34 0.07 -0.02 Business Climate -0.10 0.00 0.13 0.09 Government Performance 0.34 0.00 0.29 0.24 Competitiveness 0.07 0.13 0.29 0.51 New Economy -0.02 0.09 0.24 0.51 TOTAL 0.30 0.12 0.87 1.00 0.83
Absolute Strengths in NM Index Subindex Ranking New Economy Presence of Scientists and Engineers 1 Industry R&D Investment 5 IT professionals 6 Competitive- Budget surplus as a % of GSP 9 ness Average travel time to work 10 Students enrolled in degree granting institutions 6 Academic R&D 3 Number of S&E students as % of population 7 Scientists and Engineers as a % of labor force 8
Absolute Weaknesses in NM Index Subindex Ranking New Economy Workforce education 46 Foreign Direct Investment 48 Export Focus of Manufacturing 47 E-Government 48 Population on line 42 Competitiveness Crime Index 43 Households with installed phones 44 High speed lines as % of population 47 Percentage of population without health insurance 49 Percentage of students proficient in Math/Fourth grade 49 Exports per capita 40 Business Climate Gross Receipts Tax 48 Fiscal balance 41 Economic Earnings and job quality 50 Development Report Resource efficiency 47 Card for the States Competitiveness of existing business 46 Amenities 43
Caveats When Looking at Rankings • Theoretical underpinning. Do they measure what they say they measure? • Weighting method • Correlation between sub indexes • Lack of sequencing • Absence of correlation undermines credibility • Diagnosis needs validation
Recommend
More recommend
