Tax Foundation "Climate Index" Criticized by CBPP

Erica Williams, Assistant Director of State Fiscal Research at the Center on Budget and Policy Priorities (CBPP), wrote an article last week highlighting a new website,"Grading the States: Business Climate Ranking and the Real Path to Prosperity." According to Erica's article, the website seeks to "debunk the state rankings from several organizations purporting to measure each state's 'business climate' and prospects for economic growth." In other words, the website does not believe the rankings represent a state's true business climate.

One of the several business tax climate indexes the website criticizes is the Tax Foundation's well-known index. I respect the Tax Foundation and have always viewed their research as thorough and well done. I have also always viewed such indexes and reports as helpful insights into a state's business and tax environment. However, regardless of the index or the organization releasing such a report, I always take the report with a 'grain of salt.' Any report can display facts and statistics, but just like statistics in general, I believe any report can be slanted to tell a specific story. I also believe any report or statistics cannot tell the whole story. For example, a state's tax environment and incentives will always play a role in a corporation's location decision. However, a state's tax environment is never the only factor. Also, a corporation's location or relocation decision is a 'customized' option. Meaning, every corporation does not receive the same treatment because states make custom incentive packages for different corporations. Thus, just because a state's climate index says one thing, each corporation may feel a different tax impact based on the incentives they receive or don't receive.

In summary, I do not criticize or endorse the website or the Tax Foundation's index. I believe the conversation is healthy and puts a spotlight on the importance of a state's business and tax climate for everyone. 

Just like with most things, we can all usually agree on the problems we face, we just can't seem to agree on the solutions.