Area Development Online, a site and facility planning publication, recently posted its annual “top states for doing business” rankings. The top 10:

1.  Texas
2.  South Carolina
3.  Georgia
4.  Alabama
5.  North Carolina
6.  Louisiana
7.  Tennessee
8.  Indiana
9.  Mississippi
10.  Oklahoma

The rankings stem from a survey of location consultants. The magazine offers short profiles of the top states (No. 1 Texas is here). One location consultant, examining characteristics of the leading states, writes,

The states that are winning are those that have advantageous combinations of low taxes, [generous] incentives, and [fewer] regulations, and most offer predictable, stable political environments. This is typically coupled with an attractive balance of labor cost and availability.

The Top States also make it easy for companies to do business by offering fast-track permitting and other business-friendly practices.

As we’ve written previously (for example, in this policy brief), these rankings are often subjective and idiosyncratic. A prescription of generous incentives is clearly contrary to the Tax Foundation’s prescription for a good business tax climate and our principle that tax policy ought to favor economic neutrality. Location consultants, however, are in the business of getting the best deal for their clients. And in this competitive economic environment, good deals often come with incentives of one kind or another.

Another of Area Development’s consultants points out the importance of skilled labor.

States that are performing well also have deep pools of workers with strong skills and appropriate education levels, available at a cost that is moderate, but competitive. This balance between critical mass and cost of labor is a key factor for the most successful markets. As the economy transitions to a higher level of activity, companies that are anticipating future growth are seeking locations where appropriate labor is available at a reasonable cost today, but also that there is labor available for future expansion.

Appropriately, the magazine includes a cautionary essay.