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Some journalists, politicians, business leaders and voters have knee-jerk reactions to questions about Maine’s “business climate.” They assume they are well informed, so they stop asking hard questions that might shed a clearer light on the subject.

A recent Portland Press Herald article illustrates the problem. Under the headline “Some 71% of Mainers say they have little familiarity with the budget process this year,” Francis Quinn reports on a Market Decisions survey. It revealed that, “Even though taxes and spending are hot-button issues, Mainers are surprisingly uninformed about this year’s budget process.”

The story reported that Mainers strongly favor efforts to increase government efficiency. However, they rate the Legislature and governor poorly, despite the fact that the governor proposed and the Legislature overwhelmingly adopted a budget that stayed within spending limits set in 2005, and mandated cost-saving changes in school administration.

The Market Decisions study underscores the problem of a public that admits it is poorly informed but clings to a negative stereotype, despite substantial evidence of progress. Victoria Wallack’s recent article in The Current (Aug. 9), “Maine’s business climate panned,” suffers from a similar flaw. She summarizes year-old surveys of “business leaders” without asking herself whether hard evidence supports their perceptions about excessive state taxes and regulations.

Regarding tax burdens, a large body of economic literature has been summarized by Robert Tannenwald, vice president of the Federal Reserve Bank of Boston. The evidence shows that taxes are a minor concern in business location and expansion decisions, contrary to what Maine “business leaders” and their lobbyists claim.

Of course, the flip side of taxes is state investment in education, training and infrastructures, which businesses want government to provide them. Businesses, like the rest of us, would like lower taxes, so it is not surprising that this is their mantra. But Wallack should not repeat it uncritically.

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The same goes for Wallack’s factual discussion of Maine’s “tax burden.” She repeats the shibboleth that Maine has the second heaviest tax burden in the United States, calculated as state and local taxes divided by income. But surely Maine people need roughly the same level of governmental services as people in other states.

Considering “own source revenue,” which includes both taxes and fees, per person, 2005 census data show that Maine ranks 14th among the states. Our dollar amount, $5,467 per capita, is lower than Vermont, Rhode Island, Massachusetts, and Connecticut and just 2 percent above the U.S. average.

Comparing “own source revenues” with incomes, Maine does not fare as well: we rank ninth nationally, both because our incomes are lower and because more of Maine taxes are paid by nonresidents than in most states. Still, due to spending discipline and rising incomes, Maine’s rank is improving. A reader would never guess this from Wallack’s reporting. And economic performance in states with higher revenue/personal income ratios (Alaska, Wyoming, New York, New Mexico, West Virginia, Delaware, Utah and Hawaii) is so diverse that one should question whether tax indicators have anything to do with economic growth factors that really matter.

As it happens, Maine’s growth in gross state product, jobs and wages has been tepid the past two years, lagging New England and the nation. One national economist labels this period the “worst economic recovery on record.” But judgment requires a longer time perspective, and over the preceding four years Maine outperformed the rest of New England and the nation. Maine’s median wage, for example, rose from 90 percent of the U.S. median in 2000 to 94 percent in 2006.

The most serious constraint on Maine’s job and productivity growth appears not to be taxes or regulations, but a shortage of highly skilled workers, as our education levels and population growth lag national trends. Competition is tough any place in the United States, and success in Maine depends on the same core capacities required elsewhere: understanding customer demands and bringing materials and skilled people together to satisfy them efficiently.

Maine’s growth has had ups and downs in recent decades, but some regions of the state have enjoyed unprecedented prosperity. We could list dozens of companies that thrive in Maine’s business climate. Many have attracted new investment and ownership from out of state; including, for instance, TD Banknorth, Blue Cross Blue Shield, Unum, Oxford Networks, Bath Iron Works, Idexx Labs, Hinckley and Sabre Yachts, Guilford of Maine and Tex Tech.

The perennial complaint – “Maine is not business friendly” – begins to seem weak and self-serving in light of these facts, as well as the governor’s and Legislature’s success in removing what businesses themselves called the biggest obstacle to investment – the property tax on business equipment.

Following such business-friendly changes, when complaints persist that “nothing has changed,” it is time to re-examine the evidence – and political motives – more carefully.

Christopher St. John is executive director at the Maine Center for Economic Policy. David Vail teaches economics at Bowdoin College.

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