Before Husted Starts Saying "We're #11!"

I saw this starting to circulate amongst some Republican friends and before it gets out of hand, I thought I'd ask BizzyBlog's Tom Blumer what he thought of it because I remembered us having discussed this very same report last year on the TIB All Stars internet radio show... Here is his response:

After looking it over, this is almost definitely a new version the same lousy work we talked about during a TIB broadcast or broadcast break about a year ago.

It's not quite as bad as last year, and it looks like they've tried to improve it, but it's still very weak.

I don't envy the people who try to analyze and compile these things, but these people mostly abdicated hard work in favor of simply adding up a bunch of numbers without thinking very much about them.

The problem is that they still mostly review a whole lot of relevant factors like tax rates and just add them up without thinking about it or attempting to weight their importance.

So, for example, the gas tax is only .28, or about 0.6% of the total score, because OH's gas tax is 28 cents. The gas tax could triple and it would only add .56 to Ohio's score and cause it to lose only one place in the standings, even though it would obviously have a much worse effect on the business climate. By contrast, the top income tax rate of 5.925% is treated as 5.925 and is thus considered about 21 times more important to Ohio businesses than the gas tax.

They have an appendix listing various factors, and in all but three, OH is below #11, very often way below (I'll also compare Indiana to show how dumb this is):
- 26th in top personal income tax rate (IN-13th).
- 28th in top personal cap gains rate (IN-13th).
- 6th in top corporate income tax rate (IN-37th).
- 6th in top corporate cap gains tax rate (IN-38th).
- 31st in state and local property taxes (IN-23rd).
- 21st in State and Local sales, gross receipts and excise taxes (IN-28th).
- 26th in unemployment taxes. (IN-5th).
- 9th in health insurance mandates. (IN-16th).
- 28th in electric utility costs. (IN-16th).
- 41st in worker comp "benefits" (I think they mean "costs") per $100 of wages (IN-4th).
- 31st in crime rate. (IN-30th).
- 15th in number of government employees per 100 residents (IN-17th).
- 35th in gas tax (IN-38th).
- 34th in diesel taxes (IN-47th).
- 25th in state and local government 5-year spending trends (IN-31st).
- 33rd in per capita state and local government expenditures (IN-9th).
- 17th in highway cost effectiveness (IN-15th).

Yet because of their cockeyed non-weighting weighting scheme, OH ends up 11th.

Indiana is better than Ohio in nine of the 17 factors listed, including much better in key items like government expenditures, workers' comp, utilities, unemployment taxes, property taxes, and personal income taxes. Yet Indiana comes in 15th to Ohio's 11th. That's ridiculous.

Indiana's alleged big negatives are the top corporate rates. 8.5% is steep, but I suspect they don't kick in until very, very high levels of taxable income, and if they don't, the obvious way around it for a small business is to form a corporation where your income is taxed at the individual level (3.4% is the highest rate vs. OH's 5.925%). Problem solved.

I also eyeballed New Hampshire. In 11 out of 17 measurements it came in below its overall ranking of 33, very often in the top 10.

This is seriously out of whack and has very little credibility, as will Jon Husted or any other Ohio politician tempted to cite this as something indicating that they're on the right track. The thing they are most accountable for is the 33rd place in per capita state and local expenditures, which is nothing to brag about, especially since Indiana is 9th as noted, Kentucky is 10th, Michigan is 21st (!), and Illinois is 29th.

Bottom line: We're NOT #11...