Business Climate and Economic Conditions

PUBLISHED AUGUST 2023

One would have to be a certified, pocket-protector-wearing nerd to know offhand the name of Frank Hachman. But we can’t think of a better friend to site-selection consultants than this former University of Utah economist.

Nearly 30 years ago, he developed what’s known as the Hachman Index, which draws on metrics such as gross domestic product and employment to measure the mix of industries present in a particular region of the country.

As of its last update, the state sitting atop the index as having the nation’s most diverse business ecosystem was … Missouri. And from that diversity comes economic strength. 

A separate tool of data crunchers, known as the Herfindahl-Hirschman Index, also measures various concentrations in a given state using different metrics. That, too, gave Missouri Top 20 recognition, ranking No. 16 among states. One key driver of that scoring is the number of industries that each account for at least 5 percent of state GDP. 

Missouri had nine of them, led by: professional and business services, then manufacturing. While those two super sectors accounted for more than one-fourth of state GDP—suggesting something other than sector diversity—seven others weighed in to give the state a strong base with which to stand against economic disruption.

One reason for that is the presence of two industrial hubs in Kansas City, the state’s largest city, and St. Louis, the most populated metropolitan area. If they were to be considered 1A and 1B, then Springfield has a claim to No. 2, if not 1C. The three form a metropolitan triangle through the center of a state that excels in logistics, agribusiness, aerospace and vehicle manufacturing, chemicals, transportation equipment, printing, publishing, and alcoholic beverages.

Add all that up, and you get the nation’s 22nd-largest state, measured by Gross Domestic Product. In Missouri’s case, that figure is $295.73 billion in inflation-adjusted dollars. The state figure was up 4.6 percent between 2020 and 2021, while the national figure was 5.7 percent, with each figure somewhat overstated because of the depressing effects of the global pandemic year. 

What about the start-up prospects? The most recent state rankings by Forbes put Missouri at No. 15 for entrepreneur-friendliness. Among the eight border states, only Illinois ranked higher, a status that might be owed to the lack of a business-tax component in that magazine’s rankings.

The Show-Me State prides itself in being a cradle of entrepreneurship; companies with global reputations like H&R Block, Anheuser Busch, and Hallmark were all started here, and national brands with their roots here include Bass Pro Shops, Build-a-Bear Workshops, Edward Jones and Centene.  

With its tax structure, Missouri falls just outside the Tax Foundation’s Top 10, largely on the strength of a 4 percent corporate tax rate. Combined with a top individual rate of 5.4 percent, the state and local tax burden came to 9.2 percent. 

The statewide sales tax rate is 4.225 percent, while the average across hundreds of various taxing jurisdictions sits at 4.06 percent, yielding a combined burden of 8.29 percent on taxable transactions. It also ranks low on fuel tax, at 19.92 cents a gallon, good for 46th nationally, and is dead last in cigarette taxes, at 17 cents a pack. Property taxes? State and local per-capita levies there came to $1,114, with homeowners, on average, paying 1.01 percent of their house’s value in local property taxes.

With per-capita tax collections of just $2,447, Missouri ranked well down the list of most onerous tax structures at No. 45.