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Tennessee beats Kentucky again

By Aaron Morris

Nissan North America recently announced it is moving its headquarters – and accompanying 1,300 jobs – from California to Tennessee.

In announcing its decision, Nissan officials pointed to, among other factors, the lower cost of conducting business south of the Kentucky/Tennessee border. They also cited the opportunity to be closer to the company’s manufacturing, purchasing and supply chain management operations already in Tennessee. Nissan has a 5.4 million square-foot manufacturing facility in Smyrna and a 1 million square-foot engine and transmission plant in Decherd. Together, these plants employ 8,000 Tennesseans.

Why isn’t Kentucky landing these jobs? Tennessee’s business climate is simply more attractive for expanding companies like Nissan.

In 1947, Tennessee declared it “is unlawful for any person, firm, corporation or association of any kind to deny or attempt to deny employment to any person (by their affiliation) with any labor union or employee organization of any kind.¹” No such protection has ever existed to protect Kentucky workers.

By not enacting right-to-work legislation, Kentucky will continue to lose opportunities and jobs growing firms like Nissan are bringing to Tennessee. Right-to-work states consistently outperform other states in attracting new and higher-wage jobs while lowering unemployment rates.

Kentucky also continues to lose valuable jobs to neighboring states because of its uncompetitive tax climate. The Tax Foundation, a nonprofit research organization, lists Tennessee as the 15th-best state for doing business; Kentucky is an embarrassing 44th².

Gov. Ernie Fletcher’s so-called tax modernization plan implemented in 2005 confuses current – and potential – businesses about Kentucky’s tax policy. Fletcher added a gross receipts tax by signing into law his Alternative Minimum Calculation (AMC) that has adversely affected job creation in other states that have enacted a similar tax system.

The confounding AMC mandates that businesses pay the higher of Kentucky’s corporate income tax, a new tax on gross receipts or gross profits, or $175. Incredibly, this calculation requires that companies pay a tax whether or not they earn a profit.

The University of Tennessee estimates that the movement of Nissan’s headquarters to Tennessee will exert a $527-million impact on its state’s economy. New jobs at its new headquarters will pay an average of more than $80,000 per year³.

This is the kind of job creation that productive Kentuckians desperately need so they can continue to live and work in the state they love.

Until Kentucky’s policymakers reverse these destructive flaws in our business climate, Kentuckians can expect more – perhaps many more – announcements of jobs and investment relocating to our neighboring states.

– Aaron Morris is fiscal policy analyst for the Bluegrass Institute, Kentucky’s free-market think tank.

Sources:

1. Right to Work Laws, at http://www.nrtw.org/c/tnrtwlaw.htm.

2. “Table 1: 2004 State Business Tax Climate Index and Ranking,” Tax Foundation, at http://www.powerhomebiz.com/vol145/statetax.pdf

3. “Automaker to Locate North American Corporate Headquarters Outside Nashville,” a press release by the State of Tennessee.

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