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Ball State University

Quality Insider

Report: Nation’s Manufacturing Sector to Bounce Back in 2011–2012

States with low taxes and diverse manufacturing base are in best shape.

Published: Friday, June 25, 2010 - 13:45

(Ball State University: Muncie, IN) -- Manufacturing will recover to prerecession levels during the next two years in states with low tax rates, a diverse collection of manufacturing industries, and strong government services, says a report from Ball State University in Muncie, Indiana.

The 2010 Manufacturing and Logistics Report Card, prepared by Ball State’s Center for Business and Economic Research (CBER), grades all 50 states in several areas, including manufacturing and logistics health, human capital, cost of benefits, global position and diversification of industries, state-level productivity and innovation, tax climate, and venture capital activities.

The report was prepared by CBER at the request of Conexus Indiana, Indiana state’s advanced manufacturing initiative. It is available at http://cber.iweb.bsu.edu/research/2010/.

Michael Hicks, CBER director, believes that sometime during 2011–2012, the United State’s manufacturing output could return to the high point reached during 2006–2007, as companies ramp up production to meet growing consumer demand. Manufacturing is a cornerstone of the U.S. economy and millions of jobs were eliminated during the recent recession.

“There is a great deal of pent-up angst to expand or update existing manufacturing facilities or to simply build new ones,” Hicks says. “Those states with low tax rates and policies favorable to business creation will be the first to see new facilities in the next 18 to 24 months.”

The top five states for best tax climate are Florida, Indiana, Missouri, Montana, and Utah, while the worst are Alaska, Arkansas, Mississippi, Nebraska, and Wyoming.

“The study found that most of the Sun Belt states are enjoying real growth in manufacturing because they’ve been able to keep taxes low while improving government services, such as funding K-12 schools and higher education,” says Hicks. “Unfortunately, many states with small populations and those with inept state governments—Michigan in particular—received poor grades.”

He believes Michigan and California may not be able to attract new businesses because they are cutting school funding and services while raising taxes to balance state and local budgets.

Hicks also pointed out that states diversifying their manufacturing activity suffered less volatility than states relying on a single sector such as transportation and the auto industries.

The top five states for diversification are Kansas, Mississippi, Tennessee, Virginia, and Washington. At the bottom of the list are Alaska, Idaho, and New Mexico, which received grades of F, while Arizona, California, Massachusetts, Nevada, Oklahoma, Vermont, and Wyoming received D grades.

“Indiana gets an A for manufacturing and tax policies but is too reliant on the auto and transportation industries,” Hicks says. “However, we are one of many states trying to attract new types of manufacturing and logistics operations. As a state diversifies its manufacturing base, it shouldn’t be hurt as badly when a particular industry falls on hard times. This is what happened when the auto industry fell on its face during the last few years.”

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Ball State University

At Ball State, they’re more than just educators—they’re educational entrepreneurs. Combining top-flight talent with the top-notch resources Ball State has to offer, its students and faculty inject endless energy and creativity into what they teach and how they learn. The result—a university The Princeton Review calls one of the best in the Midwest.