The Tax Foundation, a Washington D.C.-based non-profit, non-partisan research and public education organization, monitors tax and fiscal activities at all levels of government. The foundation recently issued its 2007 state business tax climate index, which is designed to measure the competitiveness of each state’s tax system. According to the index, Wyoming has the best business tax climate and Rhode Island has the worst. Wisconsin ranked 38th best.
Curtis Dubay, an economist at the Tax Foundation and Chris Atkins, the foundation’s attorney wrote an executive summary for the foundation’s 2007 state business tax climate index.
“Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same,” they said in the executive summary. “State lawmakers are always tempted to lure business with lucrative tax incentives and subsidies. Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business climate plagued by bad tax policy. A far more effective approach is to systematically improve the business tax climate for the long term.”
State lawmakers need to remember two things, Dubay and Atkins said.
“(1.) Taxes matter to business. Taxes affect business decisions, job creation and retention, plant location, competitiveness, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. Thus a state with lower taxes will be more attractive to business investment.”
“(2.) States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately, it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.”
More information about the Tax Foundation’s business tax climate rankings is available at: www.taxfoundation.org/news/show/1923.html.
The 2007 state business tax climate rankings
(from best to worst):
1. Wyoming
2. South Dakota
3. Alaska
4. Nevada
5. Florida
6. Texas
7. New Hampshire
8. Montana
9. Delaware
10. Oregon
11. Washington
12. Indiana
13. Virginia
14. Colorado
15. Missouri
16. Utah
17. Mississippi
18. Tennessee
19. Georgia
20. Alabama
21. Oklahoma
22. Pennsylvania
23. New Mexico
24. Hawaii
25. Illinois
26. South Carolina
27. Michigan
28. Arizona
29. Maryland
30. Louisiana
31. Kansas
32. Idaho
33. North Dakota
34. West Virginia
35. Arkansas
36. Massachusetts
37. Connecticut
38. Wisconsin
39. Kentucky
40. North Carolina
41. Minnesota
42. Maine
43. Iowa
44. Nebraska
45. California
46. Vermont
47. New York
48. New Jersey
49. Ohio
50. Rhode Island
