Hogan: Tax & Regulatory Policies Key to Attracting Business

Governors have known for a long time that figuring out a way to tell their state's economic development story is almost as important as the story itself.

Baltimore, Maryland
Baltimore, Maryland

"The greatest economic story that's going on in America today is in the industrialization of the South, and "Time" magazine hasn't had one damn word to say about it," fumed Georgia Governor Herman Talmadge in the 1950's.

The message was received. A few weeks later on December 10, 1951, "Time" published, "The South, the Enlightened Revolution" which stated that “modern factories have sprung up in the cities, the small towns and the open fields."

In this age of Twitter, Facebook, cable TV and satellite radio, little has changed in one respect — nothing speaks louder than national media validation of a US state's ability to attract business.

When CNBC's annual "America's Top States for Business,"report ranked Virginia number one last year, Governor Bob McDonnell said, "We are telling the Virginia story to job creators from Beijing to Boston."

As McDonnell notes, some things have indeed changed since the 1950's.

Governors now take routine economic development trips all over the world. China and India are mandatory stops. So too are countries not often thought of as trading partners, such as Turkey, which Georgia Governor Nathan Deal visited last month.

Another pronounced change is that states' ability to attract business has evolved from traditional tax, regulatory and cost-of-business comparisons to education levels, quality of life and the ability to innovate. Although harder to quantify, these latter attributes are the building blocks of the new economy.

In my home state of Maryland, much has been said about emerging sectors like biotech and cybersecurity, and for good reason. However, our two most formidable competitors, Virginia and North Carolina, consistently outrank us in every major business climate study, including CNBC's 2011 top states study.

America's Top States For Business
America's Top States For Business

Governors in all three states discuss the importance of harnessing the attributes that lay the foundation for such new frontiers in economic development.

Unfortunately, most business climate studies cite our tax and regulatory regime as a liability.

So how do we compete?

Unlike developing a talent pool of scientists and engineers, as important as that is, there is one public policy area that governors and their legislatures have direct and immediate control over — the tax structure and regulatory environment.

New governors have gotten the message: Andrew Cuomo in New York, Scott Walker in Wisconsinand Susana Martinez in New Mexico, to name a few.

Were he still alive today, Talmadge would not be surprised to see Caterpillar and Airbus, a unit of EADS, announcing major expansions into Georgia and Alabama. And while heavy industry manufacturing may not be front and center in the new economy, it certainly has a lot to do with the most important metric of all — job creation.

Governors vying with tough competing states may find a back-to-basics approach focusing on taxes and regulations will help the economic development story write itself.


Larry Hogan, who served as a cabinet secretary under former Gov. Robert L. Ehrlich Jr., is the chairman of Change Maryland and the founder and CEO of a group of companies headquartered in Annapolis.