The economic competition between the states escalated in recent weeks as the governors of Texas and Iowa went on “business recruitment trips” in California. Given how Connecticut ranks in comparison to those states, we should be ready for guests.
States have always pursued their own strategies for success. Supreme Court Justice Louis Brandeis beautifully described states as “laboratories” of democracy. In the contest for economic growth and opportunity, states are experimenting with many ideas. Leaders in Louisiana, Kansas, and Oklahoma, for example, are discussing ways to repeal each state’s personal income tax. In Virginia, Gov. Bob McDonnell is attempting to restructure the tax system away from a gas tax and toward the sales tax to fund road improvements in the Old Dominion.
Other states, including Connecticut, are trying the crony capitalism route. Alabama’s taxpayers will pay $158 million in the coming years for European aircraft maker Airbus to locate in their state. Connecticut’s efforts include more than $300 million in incentives to nearly a dozen companies including Bridgewater Associates, a hedge fund started by the state’s richest man, Ray Dalio.
This competition is ultimately a good thing. Strategies that work will spread throughout the country while bad ones will fade away, improving the quality of life for everyone.
Over the last few weeks, the governors of Texas and Iowa took this competition to a new level. Texas Governor Rick Perry and Iowa Gov. Terry Branstad traveled to California to woo away some of that state’s employers. Golden State voters approved Proposition 30 in November 2012, hiking income and sales taxes by $6 billion. Since then, some entrepreneurs have been looking for the exits.
Rick Perry’s “business recruitment trip” took the form of a four day visit and a $24,000 ad buy on California radio stations — which returned several times that investment in earned media attention during Perry’s trip. Iowa Gov. Terry Branstad followed suit with his own trip last week, calling California a “happy hunting ground” for business.
The interest in California businesses is understandable. The Golden State is consistently ranked as one of the worst for business while Texas and Iowa rate much higher. CNBC’s Top States for Business ranked Texas as the nation’s best for business in 2012, with Iowa 12th and California 40th. Connecticut ranked 44th.
A scorecard by Forbes ranked Texas 7th, Iowa 10th, and California came in at 41st on their list. Connecticut was 39th. Another periodical, Chief Executive, ranked Texas 1st in 2012, placing Iowa at 22nd, and California ranked 50th. Connecticut was ranked 44th.
The actions of the governors of Texas and Iowa signal a more direct competition for jobs. Amid an economy that is slowly replacing some workers with cheaper labor from overseas or technological advancements, the new tactic may become commonplace. If it does, and Texas and Iowa stay at the top of these lists while California and Connecticut linger on the bottom, how long will it be before Mr. Perry or Mr. Branstad turn up in New Haven or Hartford? Perhaps it will be soon.
Heath W. Fahle is the Policy Director of the Yankee Institute for Public Policy and a former Executive Director of the Connecticut Republican Party. Contact Heath about this article by visiting www.heathwfahle.com