2014 Regional Report: The Southeast

Tennessee (No. 3): Bugging Out
Volkswagen’s July announcement that it would invest over $600 million in its Chattanooga plant, adding an additional manufacturing line, was a major win for Tennessee. Other major recent expansions and relocations include the ABC Group’s $25.5 million facility expansion in Sumner County and MicroPort Orthopedics’ $100 million plant upgrade in Arlington. The most important cluster in Tennessee is transportation manufacturing, including automotive. The state’s key advantages in manufacturing include relatively low labor costs and increasing productivity, says Matt Murray, director of the Baker Center at the University of Tennessee.

“We can’t compete with China on wages, but we can on productivity of workforce and economy,” he notes. The Tax Foundation ranks Tennessee’s state and local tax burden 6th-lowest out of 50 states and ranks its business tax climate 15th. The state spends over $1.58 billion a year on incentive programs.

North Carolina (No. 4): Tackling Tax Issues
This spring, North Carolina lawmakers followed up on last year’s widely-lauded tax reform to eliminate entrenched municipal-privilege taxes and reformed the corporate income tax code; the changes are designed to soften tax bite when business cycles fluctuate. There’s growing admiration for the state’s evolving business climate.

“North Carolina is turning economic development upside down in terms of servicing, client handling and tax structure,” says Jay Garner, president of Garner Economics in Atlanta. The region’s three major urban areas continue to experience service-sector growth—Charlotte is now the country’s second-largest center of banking services—while the state’s rural areas continue to shed jobs. Major corporate relocations and expansions this year include Novozymes’ $36 million bio-agricultural R&D facility in Wake County; BorgWarner Turbo Systems’ $32 million factory expansion in Buncombe County; and GKN Driveline’s $18 million plant expansion in Lee County. The Tax Foundation ranks North Carolina’s prereform state and local tax burden 17th-highest out of 50 states, and ranks its business tax climate 44th in the country. The Tar Heel State spends over $660 million a year on incentives.