In economic development circles, when comparing our state’s offerings to those of its neighboring states, how does Mississippi stack up?
“Most states have similar offerings and packages to promote economic development within their state, including tax reductions or exemptions, cash incentives, financing options and infrastructure improvement options,” said Dwight Evans, president and CEO of Mississippi Power, president of the Mississippi Economic Council and co-chair of the Mississippi Partnership for Economic Development.
“Mississippi is no exception,” he said. “In many cases, our programs compare favorably with other states. There will be times, however, when we may have difficulty matching other states’ incentives dollar for dollar. The $250-million package put together in Alabama for the Mercedes plant is a case in point. In cases where we can’t compete dollar for dollar, we have to sell our strengths even harder.”
Charleigh Ford, executive director of the Columbus-Lowndes Economic Development Association, said the Alabama Partnership has “very deep pockets to augment their presentations or proposals with money.”
“We’ve got to have a source of capital we can use to remain competitive,” Ford said. “Through a private partnership in Mississippi, we could. Alabama’s done a real good job in getting their program up and running, and it has been in operation for quite some time. Because they were plowing new ground, they made some mistakes. One advantage we would have is that we can profit from their mistakes.”
Jim Flanagan, president of the DeSoto County Economic Development Council, said a lack of public warehousing legislation, which involves a sales tax applied to inventory and service of a third party, places Mississippi at a disadvantage and is an issue that often comes up when companies are deciding between Mississippi and Tennessee. But financing programs through the Mississippi Business Finance Corp., and the tax benefits that accrue with it, provide distinct advantages over other states, Flanagan said.
Memphis and Shelby County, like many communities in Tennessee, offer a payment-in-lieu-of-tax schedule, which provides a tax freeze, determined by wage scales, capital investment, geographic location and number of employees, for a certain period of time, Flanagan said.
“It has some flexibility to offer incentives to service-related companies, along with manufacturers and distributors, but the impact it has on prospective clients is diminishing,” he said.
Last month, the Memphis and Shelby County Industrial Development Board voted to drop its tax freeze program from 100% to 75%, which should add more than $500,000 in new taxes to better fund education.
MMBA WORKING HARD FOR TAX CHANGES
For several years, the 1,800 members of the Mississippi Manufacturers Association have supported legislation to bring Mississippi’s income tax in line with other states and to encourage investment in environmental clean up and pollution prevention. The MMA has supported eliminating taxes on inventory, insuring that industrial training meets the needs of manufacturers no matter the company’s size and giving manufacturers a choice of electric providers, said Jerry McBride, president of the MMA.
“MMA members have been explaining to legislators that Mississippi is badly out of sync in the way we compute the corporate income tax,” McBride said. “Mississippi uses a three-factor formula that places two-thirds of the tax burden on the investment in plant and payroll in Mississippi. The other third is on sales in Mississippi. Most other states place either half or the entire burden on sales in their state, thereby reducing the burden on capital investment.”
For example, last year, when Oregon manufacturers, lead by Nike, told lawmakers they wanted a big cut in corporate income taxes, they said the change, even though it would carry a multi-million price tag, would encourage investment and increase tax revenues over time.
“Mississippi and Alabama are the only states in the Southeast who have not taken this step,” McBride said.
“A majority of the states now use a formula that gives sales a heavier weight than the other factors.
Approximately 19 states have changed their formulas since 1991. In 1995 alone, Arkansas, Georgia, New Jersey, Pennsylvania and South Carolina changed their policies to reduce the burden on in-state investment. The next year, Tennessee and Louisiana followed suit.”
Concerning the environment, the MMA favors removing taxes on equipment to prevent pollution and giving income tax credits to restore contaminated property, McBride said.
Because air and water pollution have become national concerns, many states are offering tax incentives to businesses that help in the clean up. For instance, Alabama allows pollution-control equipment to be fully deductible on franchise tax and corporate income tax, and fully exempt from sales and use taxes and property tax while Florida allows all pollution-control equipment to be assessed at salvage value rather than fair market value, thereby reducing the taxable value.
“We should change the way the pollution control equipment is taxed,” he said. “Mississippi places both a 1.5% sales tax and local property taxes on the equipment, while other states exempt this equipment from one or both. Several other states have instituted a tax credit for cleaning up contaminated sites.”
Now that 25 states have passed legislation to move to electricity competition, including Arkansas and Texas, Mississippi should not wait until it is too late to have the flexibility to shape its own plan, McBride said.
“Mississippi’s electrical costs may be lower than other states, but because of the climate, Mississippians use more electricity and the overall final cost is higher than it would be in other states,” he said.
LOUISIANA IN `TROUBLE`
Jimmy Heidel, executive director of the Vicksburg-Warren County Economic Development Foundation, Vicksburg Chamber of Commerce, and Warren County Port Commission, said Mississippi has the advantage over Louisiana — for now.
“Right now, Louisiana is in financial trouble,” Heidel said. “They’ve promised the schoolteachers a raise and then didn’t give them one. They don’t really have any programs that are competitive. The only thing that comes near to an incentive that we don’t have is that Louisiana has a department of labor and workforce training is funded in one place. But I’m not pushing a state department of labor. It’s a bad connotation.”
Because Louisiana is highly dependent on the oil and gas industry, which is in an upswing, the state should bounce back from the recent downturn in its economy, Heidel said. “We haven’t lost any significant projects (to Louisiana) in the last decade that I’m aware of, unless it’s been in the oil and gas industry,” he said. “If they were competitive, they wouldn’t be trying to privatize their operation.”
IMAGE, IMAGE, IMAGE
One factor in the site selection process that can’t be pinned down to incentives or private funds has hampered Mississippi in years past: the image factor.
“One of the toughest things I ever ran into, no matter how good our incentive programs were, was the fact we had a difficult time getting over the image factor,” said Mark Bounds, president of Madison Realty Group in Madison. “Let’s face it. You can have the best product in the world. But if you have an image problem with that product, you’re not going to sell it. Today, that’s not a problem. The outside world has a much different view of Mississippi,
in part because of the hundreds of millions of dollars of inv
estments that have been put into the state by the gaming and telecom industries.”
Mississippi has plenty to offer, Evans said.
“Mississippi’s location and existing infrastructure is second to no
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