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The Daily Signal
How Friendly Is
Your State To Businesses? See the Rankings
David Allen
November 23, 2015
Last week, the Tax Foundation released its State Business Tax Climate
Index for 2016. This annual report ranks all fifty states (plus D.C.)
on how hospitable their tax systems are to businesses.
Many factors affect a business’s ability to succeed, including prudent
tax policy. While improvements to other important business factors,
such as the workforce or in transportation, can take years to
accomplish, improvements in tax policy can take place relatively
quickly.
The Tax Foundation index uses five different taxes as criteria in
producing the rankings: individual income taxes, sales taxes, corporate
income taxes, property taxes, and unemployment insurance taxes. Each
state’s composite score reflects how well each system conforms to the
key components of proper tax policy: broad bases and low rates.
Where does your state rank? See graphic above.
Here are some of the highlights:
Wyoming is the most business-friendly state for the
fifth straight year, with South Dakota, Alaska, Florida, and Nevada
rounding out the top five. None of these states has an individual
income tax. Wyoming, South Dakota, and Nevada additionally have no
corporate income tax, and Alaska has no sales tax.
New Jersey once again scored the worst, stifling
business activity with its punitive 5.91-percent property tax (the
worst in the country after New Hampshire, but New Hampshire goes
without income and sales taxes), dual inheritance and estate taxes
(Maryland is the only other state that taxes both), and badly
structured individual income taxes. New York, California, Minnesota,
and Vermont followed New Jersey in the bottom five.
Illinois boasted the biggest improvement from last
year, jumping eight spots from 31st to 23rd. Lawmakers raised Illinois’
individual and corporate rates temporarily in 2011 in order to address
the state’s mounting fiscal crisis. These increases, which had given
Illinois one of the highest corporate tax rates in the country, were
allowed to expire on schedule in 2015.
While other factors certainly play a role, lower tax burdens generally
foster economic growth and wealth creation by attracting new
businesses, and, by extension, investment capital and jobs. Evidence
shows that states at the top of the business tax climate index
experience higher economic growth and lower average unemployment than
states at the bottom. States should strive to improve upon their
rankings to make themselves a more attractive place for businesses.
Read this and other articles with links at The Daily Signal
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