The Jersey City Independent"

photo by alan benzie

News flash: a business in Jersey City pays more taxes than it would if it were in Cheyenne, Wyo., or Reno, Nev. We know this because the 2008 Kosmont-Rose Institute Cost of Doing Business Survey was released last month. The joint project of the Kosmont Companies and the Rose Institute of State and Local Government at Claremont McKenna College is like a lot of other surveys and studies that purport to measure factors important to where businesses locate, but fail to paint a complete picture.

This one, the press release states, “provides a complete ranking of 402 cities in terms of their relative cost to business and divides this ranking into five groups called ‘Cost Ratings.’” Jersey City, along with Newark, is among the 10 most expensive cities, listed in alphabetical order. The others are Akron; Chicago; Clarksburg, W.Va.; Los Angeles; New York; Philadelphia; San Francisco; and Santa Monica. For the record, the 10 least expensive cities (also listed alphabetically) are: Cheyenne; Eugene, Ore.; Everett, Ore.; Federal Way, Wash.; Fort Worth; Gresham, Ore.; Houston; Kent, Wash.; Reno; and Vancouver, Wash.

Kosmont-Rose has some elements in common with other such rankings, like the oft-cited Tax Foundation report that ranks New Jersey dead last in business tax climate. One thing is that they’re always good for a headline. The media loves rankings. These are stories that, as we used to say in my reporting days, “write themselves.”

Another thing is that they tend to be grossly misleading.

Often there’s a qualifier in the fine print that could be taken to negate the value of the ranking. For example, the Kosmont-Rose release says that while the report “also includes information on economic development incentives that each city offers,” these things “are not computed into the Cost Rating.” In other words, government policies — like tax abatements — that might go a long way toward mitigating the factors that put a city into the high-cost category simply don’t count.

In fairness to the Kosmont-Rose Institute, I’m not able to go into a whole lot of detail on their findings because — in fairness to my wallet — I didn’t spring for the $600 it costs to purchase the complete 2008 survey (available only on CD).

Still, the shortcomings of these rankings are all too apparent. They just don’t take into account some factors that can be more important than taxes in determining whether a place is good for businesses.

One is access to markets and suppliers. If your business depends on selling to people in, say, a 100-mile radius would you rather be in Cheyenne or Jersey City? That’s a no-brainer — you want to be where the people are. Location is no small thing. It’s not hard to imagine that some people run businesses where being near New York City, the largest port complex on the East Coast, or Newark Airport could be a plus. Check the flight schedules from Reno and see if you think it’s profitable to spend down time changing planes at airports in the Midwest.

Another big factor for businesses is the education and skill level of the work force. New Jersey and the New York metropolitan area as a whole have a relatively high percentage of college graduates, of scientists and you name what else. The value of this just won’t show up in a ranking of taxes. Nor will the quality of the schools to which you’ll send your children, the cultural offerings or how many good restaurants there are.

In a way, the Kosmont-Rose survey acknowledges some of this. In the press release, Larry Kosmont says the survey “is best used as a ‘tie-breaker’ for companies that are contemplating a move or an expansion and have already determined the best mix of factors important to them such as the quality of the labor force, the cost of housing, and the proximity to their suppliers and customers.”

So wait a minute. Is this a reason to spend $600 on the survey or a reason not to?

It sounds like most businesspeople are smart enough to know that a lot more than taxes needs to go into the decision about where to locate. And it sounds like Kosmont-Rose is smart enough to know it too.

On one hand, this is a relatively harmless exercise perhaps designed to get $600 out of as many people as possible. But at a deeper level it’s more troubling than that.

It’s one more thing that pits cities against cities and states against states in a race to the business-giveaway bottom — a race Jersey City seems determined to win every time it issues a huge tax break to a company willing to relocate to this side of the Hudson. And it’s one more overly simplistic argument that can be used to rail against taxes — as common a refrain as any in Hudson County — that, while seemingly universally hated, are still crucial to meet public needs.

In the long run, the quality of life for people in every part of this nation depends on setting priorities, determining what they will cost and figuring out how to pay for them. It’s about community, not competition.