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What Just Happened to Our No. 7 Rating?
State policymakers could take some pride when The Tax Foundation issued its 2014 State Business Tax Climate Index earlier this year and ranked Montana the 7th best state in the nation.
But just last month, TV cable network CNBC came out with its annual America’s Top States for Business rankings and found Montana only 33rd best. What happened?
Only a few months prior, the American Legislative Exchange Council came out with its Rich States, Poor States annual rankings and found Montana in even worse shape at 43rd.
Not so, the Mercatus Center at George Mason University, which after raking every state over 200 policy variable coals in its Freedom in the 50 States report, ranked Montana a very respectable 12th best in the nation—with some qualifications. “Montana has a better reputation for freedom than it really deserves. In fact, the state earns a mediocre score on personal freedom and a low score on regulatory freedom, even as its overall freedom score remains above average due to low taxes.”
Still, 12th place is at least the envy of 38 other states. So what didn’t the Fraser Institute see in Montana that Mercatus did? When it issued its Economic Freedom of North America report, a measurement of all 50 states and 10 Canadian provinces, Montana came in limping at 37th. Forbes magazine rated us a little better at 26th, but the Small Business & Entrepreneurial Council dropped us to 33rd in its annual index.
What’s going on here?
Proceed With Caution
“Do not place too much stock in any of these state rankings,” warns economist William J. Dennis, the National Federation of Independent Business’ senior research fellow. “They are only a set of arbitrary indicators, and some are very bad. They also fail to take into account the varying needs from business to business. For instance, if I manufacture aluminum, the cost of electricity is everything to me. If that cost is too high, even living in a low-tax state is of minimal help to me. Another example: How do you really measure a regulatory climate, by the number of pages in the state code? Considerations like these are the reason NFIB has never come up with a state-ranking index of its own. There are just too many components to accurately measure a state.”
Added Riley Johnson, NFIB’s Montana state director: “Want to know where Montana really ranks? Ask NFIB members. They’re here on Main Street dealing with the laws and policies that govern our state every day on the most retail level. I single out NFIB members from other small-business owners, because they have a history of a greater commercial, civic and governmental involvement, and, as a result, the knowledge that brings a much more informed opinion to public discourse.”