Published: April 2, 2014
I love Colorado. I love to hike, snowboard and enjoy the great communities all over our state. And I have been blessed in business here. I moved my young family here from the Midwest in the early 90s in part due to the economic freedom Colorado offered.
But over the past few years our economic freedom has slipped.
According to the George Mason University Mercatus Center, Colorado consistently ranked in the top five most free states for decades. However, we dropped to 22nd nationally on the 2013 Economic Freedom Index. The center uses objective metrics to determine their rankings - and they matter for businesses considering expansion here. Thousands of high-paying jobs could go to one state over another based on the sort of metrics used in this ranking.
In broad terms, a business evaluates a state's attractiveness in light of the following questions: Does the state have a simple tax code and regulatory regime? Does the state provide a stable supply of well-educated problem-solvers? Does it provide predictable and fair rules? Does the state respect employee and employer freedoms? And finally, do the government leaders have a penchant for politicizing economic decisions, or do they allow the market to freely determine business success or failure?
When viewed in isolation, Colorado's economic vital signs don't look bad.
By some measures, like economic growth rates and unemployment, we are doing better than the national average. But when context is added, by comparing our economic and demographic metrics with those of our neighbors, it's clear that Colorado is lagging behind.
Utah, Arizona, Wyoming and Texas all have higher population growth, for instance, which undoubtedly also is related to the substantially more robust growth rates these states enjoy. Some of these neighbors boast four times the job growth as Colorado.
Goldman Sachs provides a real-life example. It's the world's biggest investment banking firm, headquartered in Manhattan. They boast an average annual pay per employee of $370,000. Their second largest U.S. office is not in Denver, as it could have been. The management team analyzed several locations, in light of the state government's trend toward self-restraint and business friendliness, and Utah was the clear winner. As of August 2013, Goldman Sachs had hired 1,775 employees in Salt Lake City, instead of Denver.
I wish this was an isolated case. Colorado also has missed-out on expansions by Oracle, Proctor and Gamble, Twitter, eBay and Adobe Systems. They all went to Utah, too. Accenture, AT&T and Time Warner should have expanded here, but they went to Texas instead.
They didn't choose other states because they are prettier, have better weather or offer cooler communities to live in. I think we win on those measures. They chose these states because of the superior economic freedom and opportunity they offered, relative to competitors.
Great companies are led by smart people who make choices based on objective economic criteria. If we want to compete, we need to do a number of things.
First, we need to simplify the state tax code for businesses from one jurisdiction to the next, and reduce unnecessary regulations across the board. Second, we should reject federal programs that rob communities of control and strip parents of choice. Colorado has been a leader in education reform, earning us a reputation as one of the best states for a well-educated work force. But we are at risk of losing that edge if we stop innovating and start backsliding.
Third, we need to adopt right to work laws that most of our neighbors have wisely enacted. This allows prospective employees to pursue the company of their choice, and allows employers to select whom they wish to hire.
Finally, we need to end the political meddling that supports certain industries at the expense of others.
Shouldn't Colorado be striving every day to achieve a best-in-nation business climate, by doing everything possible to expand economic freedom and opportunity? Let's climb back up the Mercatus Center Economic Freedom Index and enjoy the prosperity that comes with it.
Farah is a successful businessman who will be speaking more in-depth on this topic at Saturday's Peak Freedom Festival (peakfreedomfestival.com) in Colorado Springs.