Tax Analysts Blog

Pot Calling Kettle Black?

Posted on May 8, 2013
Good Jobs First recently published the second edition of a report entitled “Grading Places: What Do the Business Climate Rankings Really Tell Us?” The purpose of the report is to examine various business climate indexes, and prove that they are “corporate-sponsored, pseudo-social science” studies that have no predictive value of a state’s “business climate” and should not be relied upon by states as they make tax policy decisions.

Among the indexes that were criticized were those from the Beacon Hill Institute (BHI), the Tax Foundation, the Small Business and Entrepreneurial Council, and the American Legislative Exchange Council (ALEC). While each organization objected to the criticism, BHI was particularly vocal.

Good Jobs First alleged the BHI study ranking states’ business climates was flawed because it was missing large chunks of data. The question was raised as to whether BHI was fabricating data. BHI executive director David Tuerck took umbrage to the suggestion, saying the allegedly missing data was included in the study, it just wasn’t included in the report that was published on the study, so as to make the report more easily read and understood. Tuerck said BHI does “not fabricate data. We do not make up numbers that fit where we want to go with our results.”

To prove its point, BHI provided its complete data set to Good Jobs First. Good Jobs First issued a corrected report and posted the following statement on its website:
      As originally issued on May 1, this report stated that the Beacon Hill Institute's State Competitiveness Index used fabricated data. This assertion drew from a misunderstanding on our part that arose over the decision by BHI to include only some of the variables in the state-by-state comparisons.

      The Institute challenged our allegation, pointing out that on its state pages it chose to display only those variables for which a state was deemed competitive or not competitive, while complete data for each state drove the Index. The Institute provided us its complete, unpublished, data set. In response, we removed the report from our website, corrected it, and reposted it.

      Good Jobs First and Peter Fisher apologize to the Beacon Hill Institute and regret the error. Otherwise, our analysis of the State Competitiveness Index and the other rankings stands.

Still, Good Jobs First concludes that different business climate reports “wildly contradict each other and fail to predict which states’ economies will thrive.” This is because, Good Jobs First believes, the conclusions of any given group often depend on the advocacy agenda of that group.

It’s hard to argue with that statement. Data, like any other set of facts, can be spun. But I wonder, then, if this is not the pot calling the kettle black. Good Jobs First is a left-leaning group that is likely pursuing liberal policies. In fact, the first edition of the Grading Places report was put out through the Economic Policy Institute. But it’s no different than saying that ALEC is a right-leaning group that is pursuing conservative policies.

Good Jobs First is just hiding the ball a little bit by trying to get rid of reports on business climate. The Good Jobs First report says that the real issue we should be focusing on is “how to build a tax system that is fair, modern and relevant.” Yes, that’s exactly what needs to be done, but I would argue that reports on business climate add to the debate. And while I do think that such reports must be examined with a critical eye, “business climate” matters.

Good Jobs First wants to get rid of business climate reports because they don’t like incentives. They aren’t alone. I think the use of incentives goes against the general notion of good tax policy and should be curtailed. But, states will not end their use of incentives all together in part because of misconceptions about their effectiveness but also because there are some targeted incentives that help both businesses and states. Costs matter to businesses and will affect how and where they operate.

Business climate reports are not the be all and end all for developing tax policy. But they do provide valuable information and they get noticed. Perhaps focused education for state legislators and officials on the proper use (or avoidance) of incentives would better serve the goals of Good Jobs First.

Read Comments (2)

Cara Griffith's picturecara griffithMay 17, 2013

My sincere apologies for the error. It will be changed immediately.

My ultimate point though, it that policy groups work to effectuate their
policy. Downplaying the usefulness of business climate reports likely works to
support your policy goals just as releasing the business climate reports works
to support the policy goals of those that release them.

Greg LeRoyMay 18, 2013

Big error here: The Employment Policies Institute (not Policy) is the
antithesis of the Economic Policy Institute which published the first edition
of Peter Fisher's Grading Places in 2005. As for the "pot calling the kettle
black" headline and tag line, that suggests the Ms. Griffith is accusing Good
Jobs First of pseudo-social science like the indexes we criticize - but then
she never makes any such case. - Greg LeRoy, executive director, Good Jobs
First

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