State Chamber is Leading the Charge to Help NC "Break Away"
Report Highlights Needs of Business, Key Areas for Improvement -
State Chamber is Leading the Charge to Help NC 'Break Away'
A special report from our state Chamber titled, "Sustaining Success/Breaking Away" describes the state of business in North Carolina as very strong. At the same time, however, the report highlights numerous opportunities to shore up North Carolina's competitive position relative to other states and improve the business climate here. The report, to be published mid-June, is the culmination of months of work by our Chamber to assess the business community's most pressing economic concerns and benchmark North Carolina against the other 49 states in the ongoing state-to-state and country-to-country competition for jobs and commerce. Once published, the report will be available online at www.ncchamber.net.
Across America, other states are targeting North Carolina's success as a state. With our business climate as a target, state legislatures and state pro-business advocacy groups across the country are chipping away every year at the foundation of our competitive advantages. Our state Chamber's first-of-its-kind report both illustrates and validates what our customers have told us. While the state of North Carolina business is essentially very strong and we are still making progress as a state overall, there is certainly room for improvement. In fact, "continuous improvement" is the foundation upon which this important report from our state Chamber was built, since complacency would be a mistake of far-reaching consequence for North Carolina. So, where do we begin? What do we need to do to shore up North Carolina's strong competitive position as a "leader" state and move it into the coveted category of "break away" states - states such as Virginia, Colorado and Utah that have made the most substantial improvement in economic conditions over recent years? How do we position North Carolina to "break away" from the pack and generate the kind of economic growth necessary to sustain the phenomenal population growth projected for our state over the next two decades?
State Chamber Asks and Business Answers . . .
Our state Chamber asked what matters most to North Carolina business right now, and the business community answered. To get a handle on the issues most important to North Carolina business owners and operators, "State Chamber Pit Stops" were made in 18 communities across the state in fall 2006. At these listening meetings, Business Ballots were distributed and collected so that business of all sizes could lend their voices on the best methods of increasing their competitiveness and ability to create jobs. Thousands of Business Ballots were also distributed via fax and email. Many state Chamber members also answered survey questions included in Chamber newsletters.
To add scientific weight to these voices and form an important benchmark for measuring progress as a state over time, our state Chamber also commissioned its first annual CEO Poll (reported on in the last edition of THE BUSINESS Advocate) of business owners and operators.
Our customers overwhelmingly told our state Chamber that the two most important issues facing North Carolina business today are: 1) Business taxes and 2) Healthcare costs. The state's legal climate and workers' compensation system were also cited by businesses as areas important to their competitiveness and capacity for growth, particularly when it comes to business liability costs.
The majority of businesses our Chamber heard from are satisfied with the quality of the North Carolina workforce, which is a huge plus for our state and an indicator that the collective efforts and resources put into our educational systems in recent years have paid off to a good extent. While North Carolina can mark education as a major competitive strength, business owners and operators in our state still cite workforce preparedness as critical to our ability to continue to compete for jobs nationally and globally.
So, knowing what our customers have told us, what is the North Carolina Chamber doing to make North Carolina a "break away" state?
'Break-Away Moves' to Propel North Carolina Forward
While the North Carolina business climate is generally good, it has slipped in several key areas in recent years and is "standing still" in some others. All the while, other states are busy getting better. In other words, competing states are moving ahead while we are standing still in some key economic growth areas. For example, our state Chamber's report reveals that the cost of doing business in North Carolina is increasing or remaining the same, while other states are lowering their costs of doing business.
Opportunity: Specifically, the cost of doing business in North Carolina has risen for energy. One of the best ways to minimize the cost of energy for businesses would be to either lower or eliminate the sales tax on energy. Eliminating or lowering this burdensome tax would result in savings for businesses that in turn would translate into more jobs in the long run.
Solution: Our state Chamber is fighting to advance a proposal to exempt energy sold to manufacturers from the sales and use tax. We are pleased to report that we are making progress on this front, as the state House's version of a state budget included a three-year phase-out of this tax.
Opportunity: Specifically, the cost of doing business in North Carolina has risen for business liability premiums. As liability costs increase, so do workers' compensation premiums and general business liability premiums. These increasing costs are often driven by frivolous lawsuits. Even when businesses win lawsuits, the cost for time and lawsuit expenses can be staggering. Therefore, one of the best ways to control increasing costs in this area, or lower costs, is to prevent efforts to expand business liability and to fight to prevent more frivolous lawsuits.
Solution: Our state Chamber led a coalition of nearly 50 businesses, local chambers and allied organizations to successfully defeat proposals that would have more than doubled the amount of time allowed for products liability claims against manufacturers, distributors and everyone else along the product chain - preventing a significant expansion of business liability.
Opportunity: North Carolina has the highest top marginal personal income tax rate in the southeast United States - at 8.0 percent - and one of the highest in the nation. This tax is especially onerous for small business owners in the state, as they pay taxes under the personal income tax structure as opposed to the corporate. Further, this high top personal income tax rates can make it extremely difficult to fill jobs when businesses are able to grow and expand, as talent is often attracted to states where income is taxed a much lesser rate, or not at all.
Solution: Our state Chamber is fighting to lower this tax rate. We are pleased to report that the state Senate's version of a state budget does include a .25 percent decrease in the top marginal PIT rate, which would lower it from 8.0 percent to 7.75 percent.
Some other "break away" moves surfaced by the special state Chamber report include the following:
Finding ways to reduce taxes on innovation and productivity, such as the new business machinery and equipment tax (a property tax on business investments)
Identifying ways to make North Carolina's tax administration processes and procedures more predictable and fair, such as reforming the tax appeals process
Change the culture of litigation in our state by promoting policies that would prevent frivolous lawsuits that increase the cost of doing business
Support policies that will help North Carolina better prepare younger students in math, science and reading.
Identify ways to better match educational output with the needs of North Carolina business
Being the Best Requires Continuous Improvement
Like the North Carolina Chamber, government, education and civic leaders are no doubt determined to place North Carolina "best in class." Being the best, however, requires continued improvement. After all, other states are continuously working to improve their business climates by lowering business taxes, improving the legal climate, strengthening their education systems, sustaining and developing critical infrastructure, reforming their workers compensation systems, and modernizing the regulatory environment. As a result, each year other states make inroads into lowering their costs of doing business and move up in the state business climate rankings. Therefore, the moment at which North Carolina decides to slow down, or - even worse - take a year off - we might as well be moving backwards.
That is the overarching message from our state Chamber as lawmakers continue their work in Raleigh on a final state budget and a host of other policies that will impact, either directly or indirectly, the cost of doing business in North Carolina and our state's competitive position. The North Carolina Chamber will continue to carry a strong message - our customers' message - to policy makers in the General Assembly. "There's room for improvement." "Complacency is a mistake." "Business taxes matter and deserve attention now." "Healthcare costs are killing small business." And, so on . . .
Even more important, however, our state Chamber will continue to offer solutions to the challenges identified by our members - solutions like those outlined in our 2007 report on the state of North Carolina business, "Sustaining Success/Breaking Away." Smart pro-growth policies will create jobs and increase our state's revenue base. That's the message in this report and the message that permeates our Chamber's work.
Legislative Update: What is going on right now?
There are three state budget proposals on the table, so to speak - one from the governor, one from the state House and one from the Senate. Now, the House and Senate will work out the differences between their budget proposals in conference. A conference committee will be appointed by House and Senate leaders. The goal of the General Assembly is to finish its work on a state budget by June 30, which is the end of the current fiscal year.
On behalf of our members, the North Carolina Chamber will continue our efforts to ensure that the final state budget contains and/or addresses as many of our customers' priorities as possible, including both the sales tax exemption on fuel sold to manufacturers and a decrease in the top marginal personal income tax rate.
Aside from the state budget process, our Chamber will continue to work to make North Carolina a "break away" state by fighting to advance bills that will improve our state's business climate, as well as bills that would set our state back severely.
North Carolina is well positioned for growth and continued prosperity, and is poised to be a "break away" state. We cannot, however, take our state's current standing and performance for granted and wait until problems we can identify today become crises tomorrow. We must act now and continuously to build a more competitive economy that creates jobs, opportunities, and economic security.