Pockets of Complexity

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The Small Business Survival Committee used 20 measures of business friendliness – 12 of which are taxes, others are costs such as workers’ comp and state minimum wage – to announce in its annual survey this week that Maine, once again, ranks among the most the worst places…
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The Small Business Survival Committee used 20 measures of business friendliness – 12 of which are taxes, others are costs such as workers’ comp and state minimum wage – to announce in its annual survey this week that Maine, once again, ranks among the most the worst places on the continent to do business. Without questioning the usefulness of this survey, Maine residents may nevertheless be confused by a new Business Week story.

That’s the Business Week story called “America’s Pockets of Prosperity,” a feature on the “dazzling dozen” cities from across the country that are doing well despite a widespread economic slowdown. Among these 12 are the state’s two primary centers of business, Bangor and Portland. Rather than using indicators, as the SBSC did with its index, the magazine used actual performance. “The 12 towns, picked by Business Week because of their low unemployment – averaging less than 3 percent in the three months ended in July – and their ability to create jobs during the past year, may offer pointers for less blessed places,” according to the story.

Observers might look around Bangor and think, if this is prosperity, we’re all in trouble. Prosperity probably wasn’t the best word; “steady growth,” while ruining the alliteration, would have been more accurate. Even in the lousy economic climate between July 2001 and July 2002, Bangor gained a couple hundred jobs and Portland gained more than 1,000. Since 1990, their job gains have been 5,300 and 13,400 respectively, figures that often get lost when the daily story is more often about job losses.

For the record, the dazzling communities were located in eight states, listed as follows along with their friendliness ranking by the SBSC: South Dakota (1), Texas (4), Virginia (14), Arkansas (24), Wisconsin (31), North Dakota (35), Iowa (44) and Maine (49). No doubt an economist looking long enough would detect a pattern between tax friendliness and performance, but at the very least that economist might also concede that there is far more to economic development than low taxation.

State lawmakers will debate tax issues at length in the next legislative session in January, and when they do, one of them is certain to offer the tax index as proof of the disastrous business climate here. They would be right that Maine taxes are too high – but only partly right. The value of the Business Week story is to suggest how complicated, and to warn lawmakers to work comprehensively when working on prosperity.


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