States compete with one another to attract business and create jobs for a healthy economy. Sometimes this competition is characterized as a race to the bottom in terms of tax rates and loosening regulations.

A sense of balance is necessary to create a friendly business climate without putting too much burden on residents or the environment.

The Pittsburgh Business Times reported last week that Pennsylvania now ranks 43rd in the listing of the best states for business, according to Chief Executive magazine.

The Keystone State slipped to its current low ranking from 29th in 2009. This downward trend should worry officials in Harrisburg — as well as everyone else in the state. Gov. Tom Corbett and the state Legislature must work to reverse that trend and make the state more appealing to business.

Company managers and business owners look at the overall business climate, including taxes, regulatory burden, the quality of the workforce and infrastructure. All of these are considered when companies look for places to locate or expand.

As California debates higher taxes to deal with a worsening budget crisis, there are fears that some companies will consider moving out of the state in search of friendlier, less-costly business environments.

While most attention is focused on personal and corporate income taxes, the broader tax climate is considered, meaning the net effect of indidvidual and corporate income taxes, property taxes and sales taxes.

Pennsylvania, like most other states, has corporate and personal income taxes as well as a sales tax. But Pennsylvania’s ranking on taxes does play a role in job creation here.

The Tax Foundation looked at the broad spectrum of taxes and for 2011 ranked Pennsylvania 19th-highest. That’s not great, but it’s a better picture than is painted when looking only at this state’s corporate net income tax, which is the second-highest in the nation.

The Business Times article noted that Louisiana has climbed 32 spots in the business-friendly rankings since 2008, mostly by streamlining the state bureaucracy and the regulatory environment.

It was a combination of taxes and regulations that pulled Pennsylvania down on the CEO ranking of the best states for business. On the plus side, Pennsylvania did best ratings for the environment and workforce quality.

Respondents in the CEO survey cited the past practice of Harrisburg officials to borrow excessively rather than control spending. The survey also found that business leaders felt that most state officials were indifferent to mounting debt levels and simply don’t care about being business friendly.

That has to change, and Corbett has said he wants to streamline bureaucracy and reduce red tape. He also has said he wants to see lower corporate tax rates. There have been recent proposals in Harrisburg to lower the corporate net income tax rate, replacing the lost revenue by closing some tax loopholes.

Today’s budget realities, in this state and most others, can make it a challenge to become more business friendly. Important social services and education compete for limited funds, and any reduction in tax revenue will have an impact. But Corbett and state lawmakers cannot ignore Pennsylvania’s low rankings when it comes to CEOs’ perception of this state’s business climate.

Jobs are essential to building a sustainable economy, and creating a more business-friendly environment is critical to creating and retaining jobs.