What Just Happened to Our No. 1 Rating?
A few months ago, the American Legislative Exchange Council listed Utah No. 1 in the nation in its Rich States, Poor States annual rankings. But just last month, TV cable network CNBC came out with its annual America’s Top State for Business, and found us 3rd best. Still a great rating, but why the two-place drop?
After raking us over 200 policy variable coals, the Mercatus Center at George Mason University liked what it saw in Utah, for the most part, placing the state 10th best in the country in its biennial Freedom in the 50 States report. “Utah’s regulatory scores are quite high, largely due to its excellent liability system, which is more than a standard deviation better than the mean. Health insurance mandates are much less numerous than the national average (Utah is again a standard deviation better), and it is a right-to-work state. However, Utah has a lot of room for improvement. The state scores quite poorly on certain occupational freedoms, due to extensive licensing as well as high fees and educational requirements. It is only average on residential land-use restrictions. More extensive eminent domain reform is needed.”
Among other rankings, the Fraser Institute gave Utah the worst mark, if you can consider 13th a bad mark. In its Economic Freedom of North America report, which ranked all 50 states and 10 Canadian provinces, it found Alabama one place ahead of us. Alabama?
The Tax Foundation’s 2014 State Business Tax Climate Index pegged Utah as the 9th best, slightly better than the Small Business & Entrepreneurship Council’s 10th place. Forbes magazine’s Best States For Business and Careers list, however, just loved us, ranking Utah 3rd in the nation.
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 Candace Daly, NFIB’s Utah state director: “Want to know where Utah 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.”