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 Response Page - Hicks  Interview -      
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These comments are responses to the statements listed below,
which were generated in regard to the
 Michael Hicks  Interview of
08-09-2013.
 

State and local tax incentives have little effect on business relocation

                                                                                                  OVERVIEW

According to Michael Hicks, director of the Center for Business and Economic Research and professor of economics at Ball State University, Minnesota's grades are average or above for eight of nine categories in the 2013 edition of an annual scorecard of factors important to location decisions by logistics and manufacturing firms. However, in the ninth category-tax climate-Minnesota received a grade of "F."

The scorecard includes 50 variables lumped into nine different categories, with every state being graded in each category. The scorecard gave Minnesota the following grades in those categories: "A" for human capital and for productivity and innovation; "B" for manufacturing industry health, logistics industry health and expected liability gap; "C" for worker benefit costs, for global reach and for sector diversification; "F" for tax climate.

Hicks says local governments need flexibility to find the right mix of services and amenities vs. taxes that will attract residents. He states what he calls Hicks's law: In the short run, households move to jobs; in the long run, jobs move to people. He says the most successful communities have responded to what households are looking for. Research shows, he says, that tax incentives offered by state and local governments have little effect on business relocation, especially for manufacturers. He calls manufacturing businesses "footloose," because their success does not depend on local demand, so they can choose to locate almost anywhere.

For the complete interview summary see: Hicks interview notes

Response Summary: Average response ratings shown below are simply the mean of all readers’ zero-to-ten responses to the ideas proposed and should not be considered an accurate reflection of a scientifically structured poll.

Readers were asked to rank the following on a scale of 0-10 ("not at all important" to "very important").

1. Value of topic. (7.3 average response) How useful to you is today's interview?

2. Value of further study. (8.3 average response) How important is scheduling additional interviews on this topic?

Readers were asked to rate, on a scale of (0) most disagreement, to (5) neutral, to (10) most agreement, the following points made during the discussion.

3. Human capital: "A". (8.9 average response) As graded in the Ball State survey of the 50 states, Minnesota's grade should be "A" in human capital.

4. Productivity, innovation: "A" (8.5 average response) As graded in the Ball State survey, Minnesota's grade should be "A" in productivity and innovation.

5. Manufacturing industry health: "B" (7.2 average response) As graded in the Ball State survey, Minnesota's grade should be "B" in manufacturing industry health.

6. Logistics industry health: "B" (7.7 average response) As graded in the Ball State survey, Minnesota's grade should be "B" in logistics industry health.

7. Expected liability gap: "B" (7.0 average response) As graded in the Ball State survey, Minnesota's grade should be "B" in expected liability gap

8. Worker benefit costs: "C" (5.8 average response) As graded in the Ball State survey, Minnesota's grade should be "C" in worker benefit costs.

9. Global reach: "C" (5.1 average response) As graded in the Ball State survey, Minnesota's grade should be "C" in global reach.

10. Sector diversification: "C" (5.6 average response) As graded in the Ball State survey, Minnesota's grade should be "C" in sector diversification.

11. Tax climate: "F" (6.3 average response) As graded in the Ball State survey, Minnesota's grade should be "F" in tax climate.

12. Long term, jobs follow people. (7.6 average response) In the short run people move to where the jobs are; in the long run jobs move to where the people are.

13. Tax incentives less effective. (8.6 average response) Tax incentives have less impact on attracting businesses than is popularly thought.

Response Distribution:

Not at all

Slightly

Neutral

Moderately

Very

Total Responses

1. Usefulness of topic.

0%

0%

11%

67%

22%

9

2. Importance of further study.

0%

0%

11%

67%

22%

9

Response Distribution:

Strongly disagree

Moderately disagree

Neutral

Moderately agree

Strongly agree

Total Responses

1. Value of topic.

0%

0%

11%

67%

22%

9

2. Value of further study.

0%

0%

11%

67%

22%

9

3. Human capital: "A".

0%

0%

0%

56%

44%

9

4. Productivity, innovation: "A"

0%

0%

0%

67%

33%

9

5. Manufacturing industry health: "B"

0%

11%

0%

89%

0%

9

6. Logistics industry health: "B"

0%

0%

11%

67%

22%

9

7. Expected liability gap: "B"

0%

0%

33%

56%

11%

9

8. Worker benefit costs: "C"

11%

11%

22%

44%

11%

9

9. Global reach: "C"

13%

0%

50%

38%

0%

8

10. Sector diversification: "C"

0%

13%

38%

50%

0%

8

11. Tax climate: "F"

13%

13%

13%

50%

13%

8

12. Long term, jobs follow people.

0%

11%

0%

67%

22%

9

13. Tax incentives less effective.

0%

0%

0%

67%

33%

9

Individual Responses:

Dave Broden (7.5) (7.5) (10) (10) (7.5) (10) (5) (10) (0) (2.5) (2.5) (2.5) (7.5)

1. Value of topic. A solid approach and some good data; lack of focus at times.

2. Value of further study. Builds good baseline for continuing discussion regarding Minnesota competitiveness .

3. Human capital: "A". That is definitely correct and a very strong endorsement of the role of workforce quality and effective education at all levels.

4. Productivity, innovation: "A". The quality of the workforce and the work habits of Minnesota seem to make a very positive impact which shows up in quality of work, attendance and commitment.

5. Manufacturing industry health: "B". In terms of the work level that is correct. In terms of the quality and style of manufacturing Minnesota has some very innovative resources. It may be important to measure manufacturing in terms of manufacturing capability and resources as well as overall.

6. Logistics industry health: "B". This is a risk in Minnesota competitiveness: logistics must be a core capability and is often not viewed as such. Without good strong logistics other business cannot thrive.

7. Expected liability gap: "B". Unclear [how this is] related to this topic

8. Worker benefit costs: "C". This is [a] factor that needs further study. Minnesota is a high paying benefit state, but what the impact [may be] is not clear.

9. Global reach: "C". Global reach is much more significant than a "C". Duluth is [an] international seaport. Rail center remains to the west. Mississippi is barge traffic to the gulf. And export business is a big factor when agribusiness is included.

10. Sector diversification: "C". A "C" for diversity seems way off base when looking how diversity has kept unemployment below national average and opportunities exist in many sectors.

11. Tax climate: "F". Need to assess tax climate in terms of what is provided for the tax dollar. It is more than taxes; it is overall value.

12. Long term, jobs follow people. This may have been the approach in the past. But many studies today and data suggest that the US mobility factors are changing and that is one reason the unemployment is in some ways skewed.

13. Tax incentives less effective. This is often given as the reasons companies come and go, but [there is] no solid meaningful data.

Don Anderson (7.5) (7.5) (10) (10) (7.5) (10) (5) (2.5) (5) (5) (5) (7.5) (10)

Paul Gilje (7.5) (10) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5)

Dennis L. Johnson (10) (7.5) (10) (7.5) (7.5) (7.5) (10) (7.5) (7.5) (7.5) (10) (10) (10)

13. Tax incentives less effective. Very good interview - this gets at the basics of economic vitality.

John Watson Milton (10) (10) (7.5) (7.5) (7.5) (7.5) (7.5) (0) (5) (5) (0) (7.5) (10)

1. Value of topic. For decades, the "not more taxes" people have asserted that businesses will move willy-nilly from state to state because of differentials in taxes. Most of the evidence refutes this, but it's like arguing against the "no climate change" religiously impaired. Hooray for Michael Hicks.

Peter Hennessey (na) (na) (na) (na) (na) (na) (na) (na) (na) (na) (na) (na) (na)

I don't know whether to laugh or cry. But one thing is certain. The good professor should re-do his "research." My son works for Petco and they moved their HQ from San Diego, CA to San Antonio, TX. Gee, I wonder why. That is one example of the exodus out of CA that I know from direct experience that is relevant to the … assertion made in the title of this week's report.

Tom Spitznagle (7) (7) (8) (7) (4) (5) (5) (7) (5) (5) (9) (7) (7)

Wayne Jennings (9) (9) (9) (9) (8) (8) (8) (8) (6) (6) (7) (8) (8)

What comes across is the diversity of factors affecting a business decision. Quality of life, health of infrastructure (e.g. roads), amenities and other features rank high and require attention and maintenance that produce optimism and positive outlook of our people—thus attractive to investors. It’s exciting to read about businesses expanding or locating in MN and we should address the factors that accelerate those decisions. It means addressing tax issues but addressing the other many factors as well.

Chuck Lutz (na) (na) (na) (na) (na) (na) (na) (na) (na) (na) (na) (10) (9)

Paul and Ruth Hauge (8) (9) (8) (8) (7) (6) (7) (5) (5) (6) (9) (8) (8)

Are there other interviewees that could be contacted that may be able to confirm or oppose Michael Hicks conclusions?

Carolyn Ring (5) (5) (10) (10) (8) (8) (8) (5) (na) (na) (na) (na) (na)

MN could do a better job of preparing workers’ education to satisfy companies’ needs. There should be more cooperation and coordination between business and industry, and schools of higher learner whether they be colleges and universities or technical schools. It goes without saying MN tax laws need a complete overhaul.

    

The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Core participants include persons of varying political persuasions,
reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

   David Broden,  Janis Clay,  Bill Frenzel,  Paul Gilje,   Jan Hively,  Dan Loritz (Chair),  Marina Lyon,  Joe Mansky, 
Tim McDonald,  John Mooty,  Jim Olson,  Wayne Popham  and Bob White


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