South Ranks at Bottom of New Economy Study

The 2007 State New Economy Index was released this Tuesday outlining which states are ready to compete in the new globalized economy. Two southern states fared relatively well in the rankings. Virginia was the highest ranked southern state at number 9, while Georgia ranked 18th overall.

The index measured how well states are transforming from industrial based models, which measure success by the number of big company relocations to the state, to models which create and retain high value-added, high-wage jobs.

The most important driver of the new economy, according to the index, is information technology, which boosts productivity in virtually all industries.

Outside Virginia and Georgia, Southern states fell in the bottom half of the rankings. The New Economy Index ranks Southern states in the following order: North Carolina (26), Tennessee (36), South Carolina (39), Louisiana (44), Kentucky (45), Alabama (46), Arkansas (47), Mississippi (49). As a region, the South has traditionally lagged behind the rest of the nation in economic studies and indicators. What is notable about this study is it's focus on the changing economy and the viability of state and national economies in the future. If Southern states want to compete economically in the future they should heed the experts' advice.

"In order to succeed in the new global economy, states can no longer rely on a strategy of relentlessly driving down costs and providing large incentives to attract locationally mobile branch plants or offices," said Dr. Robert D. Atkinson, president of the Information Technology and Innovation Foundation and primary author of the Index. "Rather, these states must create an environment that fosters innovation and high skills in order to help fast growing entrepreneurial firms and innovative existing firms expand."

SC urged to raise cigarette tax

Tobacco foes in South Carolina are pushing a proposal that would raise the state's lowest-in-the-nation cigarette tax (7 cents a pack) almost to the national average of $1 per pack. (The national average now is $1.01).

The 93-cent per pack raise by Rep. Seth Whipper, D-Charleston, is similar to a proposal made last year by the Center for a Better South in its Doing Better book. (More) The proposal would hike the tax three times more than a proposal floated by GOP Gov. Mark Sanford.

Advocates say the tax would raise $223 million in South Carolina. They say the money could be used for a variety of purposes, including research, smoking cessation plans, and programs for kids to improve health, nutrition and literacy.

House leaders, however, say the proposal hasn't got much of a chance this year. More: The State, Greenville News.

Earned Income Tax Credit Debated in North Carolina

The debate over instituting the Earned Income Tax Credit in North Carolina is heating up in Raleigh. The Center for a Better South endorses the EITC in last year’s report Doing Better: Progressive Tax Reform for the American South.

The federal earned income tax credit (EITC) is a program that reduces or eliminates the taxes that many working poor pay. In some cases, when the credit exceeds the amount of income taxes that a taxpayer has paid, it acts as a wage subsidy. Since 1975, the federal earned income tax credit has been more effective at lifting families out of poverty than any other government program," said MaryBe McMillan, secretary-treasurer of the North Carolina AFL-CIO, which supports establishing a North Carolina program. "And in these current economic times, there are more families teetering on the edge of poverty."

The introduction of the EITC is being met with strong opposition from conservative state representatives and policy experts.

"It's not going to keep somebody out of poverty," said Joe Coletti, fiscal policy analyst for the John Locke Foundation, a conservative think tank in Raleigh. "It's going to help at the margin. You're still going to be giving back to the person more than they paid in in income tax. It turns into welfare instead of just a tax credit. Sen. Eddie Goodall, R-Union, said in a prepared statement that under a plan where the state EITC credit would be 5 percent of the federal credit, much of the money would actually be a "welfare transfer" instead of a tax credit. “Because this allows any excess over and above the individual's North Carolina income tax to be refundable, it means even after a taxpayer pays no North Carolina income tax, they would get a bonus paid for by everyone else," Goodall said.

Many of these same arguments against the EITC in North Carolina are echoed throughout Southern Legislatures by opponents. Southern Progressives must make their voices heard to help reform the state tax systems throughout the South.

Khaki memories

Base-closings are a fact of life for much of the South. Here in Anniston, what to do with the former Fort McClellan is a heated topic. But missing from that discussion of re-use of its 18,000 acres is the perspective of those who once called the fort home. Sunday's Star published an essay by staffer Tosha Jupiter, who lived on the base twice as the child of a GI.
She writes:

I'm not a city planner, politician or anything close to that. I've only got
memories and sentiment in this fight. I just hope that the folks put in charge
of my Fort McClellan will give their hearts to this place — and, in time, maybe
I'll learn to call it McClellan, because, though I've fought it, I think it's
where I'm from.

Check out the entire piece here.

Business Subsidies Revisited

A recent decision by state and local officials in North Carolina to offer a large subsidy package to Google has reopened a long-simmering debate about the effectiveness and wisdom of using tax breaks to recruit industry.

State and local officials recently promised Google a package of subsidies that could amount to as much as $260 million over a 30-year period. In return, Google will open a data processing center that could employ as many as 210 people in Caldwell County, an area hard hit by the decline of traditional industries. A summary of the deal is available in today's issue of The News & Observer.

The size of the subsidy package, coupled with the strong-arm negotiating tactics used by Google, has renewed debate about the appropriateness, wisdom and fairness of such deals. Are they necessary parts of an economic development strategy or gifts to favored industries financed by pre-existing businesses and individual taxpayers?

In response, the North Carolina Senate has announced a review of the state's subsidy policies and processes. That review likely will cast a spotlight on a contentious issues facing states across the South.

Report: South needs to be smarter about giving

The South, once the throwback of regions in the nation, is now an economic powerhouse that has wealth. But Southern givers are charitable -- meaning they give to relieve immediate needs such as Hurricane Katrina or the local United Way -- but not philanthropic, according to the new State of the South 2007 report by MDC. There's a big difference, as UNC-Chapel Hill coauthor Ferrel Guillory explained this week to S.C. Statehouse Report:

The difference is highlighted in Jesus' parable of the Good Samaritan, explains Ferrel Guillory of the University of North Carolina. In the story, thugs attacked a man, robbed him and left him to die by a road. Two men, including a priest, saw him, but scurried away. Then came a Samaritan, whose people had a general antipathy for Jews like the hurt man. But the Samaritan stopped and helped. He even took the injured man to an inn to recover and paid the innkeeper for expenses.

"The Good Samaritan is a wonderful guy. But who is policing the road? Sooner or later, you've got to get into who is policing the road and that is what philanthropy is about."

The South, which has grown by more than 20 million people since 1980 into an economic powerhouse of 74 million people, is ready to be smarter about how it invests in society, the report says.

"We are full of Samaritans in the South, but now we've got an opportunity because we are a more affluent society," Guillory said. "So we can afford to begin to aggregate our money through foundations and non-profits to do the research and find the projects that will go deeper into helping society."

Brack: A year of decency for legislators

The (Louisville, KY) Courier-Journal this week ran an op-ed column by the Center for a Better South's that suggested for Southern lawmakers to emulate former President Gerald Ford's decency during 2007 deliberations:

Decency like that exercised by Ford also suggests being fair. As Southern state lawmakers grapple with budgets for the coming year, they can make things fairer for more people in their states by modernizing how they tax people.

Considering College in NC

Americans have long seen higher education as an engine of personal and social advancement. Recently, however, institutions of higher education have been buffeted by social and economic forces that have undercut the promise of higher education. Troubling questions of affordability, accessibility, readiness and completion all abound.

These topics were the subject of a special one-week series on WUNC Radio, the NPR affiliate in Raleigh-Durham. By blending news reports, commentaries and discussions with education leaders across the state, North Carolina Voices: Considering College plumbed many of the questions confronting North Carolina's model system of postsecondary education.

Audio files of all the series' segments are available for free download here.

Georgia considers reforming tax code

Last year when the Center for a Better South published its ideas for progressive tax reform, Georgia House Ways and Means Chair Larry O'Neal, R-Warner Robbins, recognized that sales tax exemptions and antiquated income tax brackets were a potential source of unfairness. (Augusta Chronicle, 6/24/06).

Now in the new legislative session, O'Neal told the Macon Telegraph that he expects tax reform to be a major part of the session. For a year, he's worked with colleagues to develop a massive tax reform report. But he said he expects the tax code, which he described as pretty reliable, to be tweaked, not overhauled.

He told committee members Tuesday that the goal in this complicated process is to avoid "one single unintended consequence" from tax code changes.