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Winners and losers
Today's economy is one in which individuals and companies generally don't consider national boundaries when deciding where to purchase goods and services or to market products. This trend, called “globalization,” has lowered trade barriers and opened new markets to American products. At the same time, U.S. companies find it easier to establish operations in countries where the cost of labor is a fraction of what it is here—a boon to labor-intensive industries, such as manufacturing and the service sector, but often a drawback to workers in those industries.
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Economic growth in China and other countries is making the world market more competitive, driving up prices. But the booming economies are increasing demand for U.S. agriculture products. For example, China purchased about 10 percent of all U.S. agricultural exports in 2004.
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“Free trade and globalization help economies row, but it creates winners and losers,” DeBoer says. “The economy as a whole is better off, but, unfortunately, globalization doesn't mean that every worker, industry or state is going to be better off. The way Indiana is positioned, it's clear that some regions will end up being harder hit.”
To cope with globalization, DeBoer believes Indiana's leaders must ensure that the state's core industries remain strong as well as attract new business investment. “We need to make Indiana a profitable place to do business and to create new jobs,” he says.
An expert in local and state government and public policy, DeBoer points to some initiatives already in place that should help spur business development, including the 2002 repeal of the Corporate Gross Income Tax. This strategy was not popular with everyone, because it shifted taxes from businesses to homeowners, but it provided significant tax relief for small businesses, which previously had been taxed even if they operated at a loss.
Last fall, Indiana citizens voted to amend the state constitution to eliminate the property tax on inventory, a change that will go into effect in 2007. This change may be especially attractive to businesses in transportation, distribution and logistics, or TDL, an industry in which Indiana is well positioned to grow.
“We don't have mountains, we don't have oceans, but we do have interstates and a central geographic location,” DeBoer says. ”This makes us attractive for companies that are looking for convenient locations for warehouses and distribution centers.”
But the state's centralized location doesn't always compensate for the fact that it is one of only a handful of states that tax companies on their inventory every year—a major disincentive for companies that exist in part to store large quantities of materials. “We're telling people that we have great transportation infrastructure, and we're close to many major centers of population, but if they locate a warehouse here, we'll tax them. If Indiana has this tax, and Illinois doesn't, where would you go?” DeBoer asks. “I think the changes in the tax code are a real step ahead. We're making Indiana a more profitable place to do business.”
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