How Rhode Island Measures Up – A Review of the State’s Business Climate Rankings

A review of five business climate ranking studies indicates that Rhode Island is not perceived as a good place to start or grow a business.  Four of the five studies – two from research organizations (The Tax Foundation and the Small Business and Entrepreneurship (SBE) Council) and three by media outlets (Forbes, CNBC and Chief Executive – ranked the Ocean State’s business climate in the bottom ten in the country.  RIPEC examined the five reports and found that the state consistently performed poorly with regards to its tax and regulatory environment, cost of doing business, transportation infrastructure and economy.

By most estimates, Rhode Island’s economic recovery will lag behind its neighbors and the rest of the country, in part because the state has been unable to create an attractive environment for businesses – particularly businesses that offer high-wage, “knowledge economy” jobs.  While business location decisions are driven by a number of factors, including the quality of life, cost of living, and quality of the workforce, taxation and regulatory environments are two areas in which states and municipalities are able to affect change within relatively short time frames.  However, the state must also take a long-term view with regard to economic development, and make the sort of changes that will improve the negative perceptions that surround Rhode Island’s business climate.

Making improvements in the state’s business climate ranking is possible.  Such approaches include amending the taxation system, improving regulatory conditions, fixing the transportation system, and developing new industries.  Moreover, Rhode Island can and should build on the more positive aspects of the study, such as leveraging the capacity of the state’s institutes of higher education, in order to improve the state’s ranking.  The next few years will present economic challenges for all states.  How Rhode Island chooses to respond to these challenges will go a long way in determining the future direction of the state’s economy. 

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