On economic development, Montana, taxes, and Forbes magazine

by: Jay Stevens

Wed Jul 25, 2007 at 13:51:28 PM MST

Looking at Montana's economy is like looking at its landscape: tall mountains and deep valleys. Much of the state's economic good fortune has come as a result of natural resource industries and agriculture - part of Montana's traditional economy. We can still grow those industries. We can also try and set up a state where high tech, value-added and manufacturing companies look at Montana as a good place to set up shop. But, we are a long way away from making Montana competitive with regional states.

Another take would be that this rating appears -- based on the different categories (see below) -- to be about whether big business wants to invest here. Montana has a thriving small business community, and most jobs in my field -- software tech -- are with small, independent start-up businesses. That is, the economy is doing well despite the absence of big corporate offices.

The weird thing is that MMS seems to be blaming taxes for Montana's woes:

Statistics can tell you a lot, but they can't tell you everything. For example, a COST ranking of tax systems around the country put Montana in the top ten for best business tax climate. If you talk to business people who operate in multiple states, however, they will laugh in your face if you told them our tax system was 8th best in the country. Still, the Forbes study puts Montana WAY behind other state in our region, which should make us consider why that is.

But look at the rankings -- emphasis mine on the places where Montana ranks the lowest:

The rankings took into account a variety of factors: in business costs we were 24th (cost of labor, energy and taxes), in labor rank we were 21st (measures educational attainment, net migration and projected population growth), in regulatory environment we were 47th (measures regulatory and tort climate, incentives, transportation, and bond ratings), in economic climate we were 13th (reflects job, income and gross state product growth as well as unemployment and presence of big companies), in growth prospects we were 48th (reflects projected job, income and gross state product growth as well as business openings/closings and venture capital investments), and in quality of life we were 42nd (index of schools, health, crime, cost of living and poverty rates). This gave us the overall ranking of 42nd in the country.

Get it? Most of our woes are due to problems with infrastructure, especially the "quality of life rating." You want to know why high-tech companies don't move to Montana? Lack of access, and lack of skilled employees. That seems to imply that if the state spends more on infrastructure development instead of cutting taxes for businesses, we'd be better off.

See? Education is important!