Tennessee Finishes Behind Georgia for Best Economic Development Climate


May 13, 2014 4:13PM

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To quote the infamous race-car driving, need-for-speed philosopher Ricky Bobby, “If you ain’t first, you’re last.” Tennessee was just named the nation’s first loser in business publication Site Selection’s popular annual ranking of the 50 states’ economic climates this year. Finishing just behind Georgia for the top spot, Tennessee was declared the second best state to grow one’s business, and wallet-size, during 2013.

As noted by the Chattanooga Times Free Press, there may be an impulse to tout TN’s high billet as evidence that our tax system, web of regulations, and corporate welfare records are in good working condition. Yet, why should we be satisfied with second best? Is that not simply first worst?

In fact, Tennessee used to be top dog. In Site Selection’s 2008 annual ranking, our state finished first in economic development success. Site Selection cites their criteria for determining their annual rankings is based upon 10 factors, “including total new and expanded facilities announced last year, new jobs added in 2013, and the state’s tax rankings by the Tax Foundation”—a national free-market public policy institute. So why has Tennessee slipped from first?

The problem is not necessarily that Tennessee is imposing new taxes or discouraging business investment through new legislation, but rather that other states—including Georgia—are outpacing Tennessee at reforming current limitations to economic growth. Georgia has reduced or eliminated several taxes and promises to take aim at more tax cuts down the road. Georiga Governor Nathan Deal explains,

“We have to be willing to be fluid and to adjust policies to meet the needs of the times… If you’re stuck in a mold in which there isn’t a willingness to address new issues… you’ll get left behind.”

Tennessee has made similar steps in the right direction over recent years, phasing out the death tax, cutting food taxes, and retroactively repealing the gift tax. Yet, the government has been unwilling to let go of one key asterisk in Tennessee’s tax code—the Hall Income Tax on investments. At a high 6 percent rate, this tax burdens state retirees and business developers looking to attract stockholders and build capital for future job growth.

In the 2014 legislative session that just concluded, leading lawmakers proposed a phase out of the Hall Tax similar to the death tax repeal, but the measure ultimately failed to pass through committee. In 2015, the Tennessee legislature would be wise to take a note from the Georgia governor’s playbook.

The Beacon Center is tired of seeing Tennessee finish first behind winners. As Ricky Bobby would say, let’s “shake and bake” our way to number one next year.

-Lindsay Boyd