Seeking hole truth about scorching business climate

When the Small Business Survival Committee published, about this time last year, its 2001 index of government-imposed or government-related costs, Maine was ranked a dismal 48th among the states and described as a tax “hellhole.” SBSC’s 2002 rankings now are out and Maine has slipped to 49th.

This raises several obvious questions. Has the hellhole, widely regarded as the deepest pit of human misery, been deepened during the past year? If so, who carried out this upgrade to the infernal infrastructure? If it was Enron, how do we know hell itself wasn’t sold to a subsidiary incorporated on the planet Neptune in exchange for stardust futures with the speculative proceeds booked as current revenue?

And, are Washington-based special-interest groups required by federal law to employ inflammatory rhetoric and simplistic formulae in describing complex situations?

Maine officials are not happy with the new SBSC rankings and not just because Maine officials are a thin-skinned lot especially sensitive to lousy business-climate rankings. The rankings are based upon 20 factors – mostly taxes and regulations – that SBSC considers unfriendly to small business. Factors that mitigate those factors are not given such consideration.

For example, notes Maine Economic Development Commissioner Steve Levesque, Maine’s tax on business equipment is counted, but the program to reimburse businesses paying the tax is not. This is one of those complex situations – the amortized tax is paid to municipalities and is an important part of local revenue, completely eliminating the tax is a tricky long-term project, an effective immediate fix is for the state to reimburse the businesses that pay the tax – that apparently is beyond the scope of the repetitive, self-promoting reports issued by Washington-based special interest groups.

What’s particularly galling here is this particular program is one for which Maine officials take an enormous amount of heat on behalf of the state’s business community.

The Business Equipment Tax Reimbursement program – the infamous BETR – has become incredibly expensive in its six years of existence (it now tops $50 million), it is widely criticized for not holding recipients to some kind of performance standards related to jobs and wages, attempts to change it always produce some of the ugliest arguments of any legislative session. People with jobs like Mr. Levesque’s always rise to BETR’s defense and the program so important to business is saved, without so much as a “thank you” from the national organizations that are always telling states to do what Maine is doing.

This is the second consecutive year Mr. Levesque has pointed out this omission and others like it in the SBSC report. He says his state would be ranked in the middle of the pack if it were given proper credit for its pro-business policies.

He’s not the only one saying that. Last year, Kansas Lt. Gov. Gary Shearer, who doubles as secretary of the Kansas Department of Commerce and Housing, took issue with the SBSC ranking of his state as 47th, the nation’s third deepest hellhole. He pointed out several specific flaws in SBSC methodology that led to flawed conclusions and he made the very good point that not all business-climate factors are created equal, yet SBSC treats them as such.

For instance, Mr. Shearer observed, Kansas (like Maine) has a very low incidence of crime. One might think that any rational businessperson would consider the ability to operate free of theft or violence as more important than the alternative minimum tax rate, but SBSC does not. Kansas (also like Maine) has very good public schools with very high high-school graduation rates. Considering all the noise business makes about the importance of a well-educated workforce, one might think SBSC would include that somewhere in its list of factors, but it does not. SBSC’s response to such objections is the insightful observation that, of course, states that rank low don’t like their rankings.

Worse, though, is the response from Maine’s business community. Already the 2002 report is being cited as gospel, its flaws ignored, Maine’s pro-business programs and earnest efforts at tax reform forgotten. Many Maine businesses, we’re told, would rather be someplace else – and they’d probably move in a minute if they could only figure out how to take low crime and good schools with them.

This raises a couple more obvious questions. Other than the wear and tear it will save on their own cash registers, how does the Maine business community hope to profit from embracing a flawed report that erroneously portrays their place of business as one of the netherworld’s less desirable neighborhoods? When will that hellhole be deep enough to safely bury such reports?

Bruce Kyle is the assistant editorial page editor for the Bangor Daily News.