How Georgia Manufacturing Law Made It the #1 State in Which To Do Business

March 17, 2015 | Charles Bowen

Question:

Are Georgia manufacturing laws, tax structures and commerce policies making the state more attractive to new businesses and also encouraging existing companies to expand?

 

Answer:

Yes.  One prominent study has determined that Georgia is the top state in which to do business. In addition, there are policy changes being considered that may well serve to improve Georgia's standing even more.

For the past eight years, CNBC has published a ranking of “America’s Top States for Business” based on 56 competitiveness metrics separated into ten broader categories. In the 2014 report, Georgia ranked as the #1 state for business and has been listed in the top ten in each of the past eight years (including three times in the top four).

2014 TOP TEN

2014 CNBC America's Top States For Business

According to the survey methodology, the ten categories are weighted based on how “frequently the category is used as a selling point in state economic development marketing materials.”

Georgia’s number one ranking is highly attributed to top scores in Economy (metrics include: economic growth, job creation, residential real estate market health, credit ratings, state revenue compared to budget, and others), Infrastructure & Transportation (metrics include: value of goods shipped by by all modes of transportation - the Savannah port is a key contributor to this category, quality of roads and bridges, commute times, safe water supply, etc) and Workforce (metrics include: education level, availability of workers, union membership, worker training program success, right-to-work laws, etc).

2014 CNBC America's Top States For Business


Below is a table that shows how Georgia fared in 2014 as well as an average of the category and overall rankings for the previous seven years. Highlighted in orange are the three categories most impacted by Georgia manufacturing law, tax structure and policy which oftentimes are levers that can be pulled more expeditiously in attempts to attract new businesses and encourage expansion.

CNBC 8 year ranking history


When ranking Cost of Doing Business, the surveyors focused mainly on tax burden, including state and local business taxes, gasoline taxes and and individual income and property taxes. Other costs--including rental for commercial, office and industrial spaces as well as wage costs and utilities--are also factored into this category.

The 2015 State Business Tax Climate Index from the Washington-based Tax Foundation ranked Georgia as the state with the eighth most friendly Corporate Tax Rank but 36th overall when factoring in Sales Tax Rank (#17), Property Tax Rank (#30), Unemployment Insurance Tax Rank (#36) and Individual Income Tax Rank (#42).

House Bill 57 (The Solar Power Free-Market Financing Act), which was recently passed by the House of Representatives and is now on its way through the Senate, may change that ranking by significantly helping businesses invest in solar power and lower their utility bills over time.

 

Business Friendliness rankings are a judgment of each state’s regulatory frameworks and the “perceived friendliness of their legal and tort liability systems.”

In 2010, voters ratified the Georgia Restrictive Covenant Act, a house bill that had been previously signed in 2009 (HB 173). This amendment allows Georgia Legislature to enact laws authorizing non-compete covenants between employers and their employees and sets out rules for enforcement. This legislation is viewed to be business-friendly as it grants more protection to companies concerned with guarding trade secrets.

Senate Bill 63, The Beer Jobs Bill, was passed by the Senate earlier this month and is now headed to the state House. If passed, breweries will be able to sell restricted amounts of their products directly to consumers (as they can in 45 other states). It is anticipated that this policy change may make the proposition of opening a brewery in Georgia much more appealing than it currently is as the more profitable revenue stream can offset startup costs. 

 

Access to Capital factors in the amount of venture capital and small-business lending done in each state.

In 2011, the Invest Georgia Exemption (the “IGE”) was passed by state legislature making Georgia one of the first states to legalize equity-based crowdfunding, allowing both accredited and non-accredited investors to participate in small-business investments.


Bottom Line

For a variety of reasons, Georgia is an excellent state in which to conduct or invest in business. The methodology of this particular survey may not be perfect, but it does shed light on the business-related strengths and weaknesses of each state. If Georgia were to implement tax reforms, it could be argued that it would not only attract even more new businesses, but also other categories such as quality of life and cost of living would be the beneficiaries and Georgia could separate itself even further ahead of the pack.

 Click Here to Download The Bowen Law Group's Checklist for New Business Owners

 

Topics: Georgia Manufacturing Law