Washington ranked 6th for business tax climate

The non-partisan, non-profit Tax Foundation has released its annual states ranking based on business climate. For all the hand-wringing about the tax burden on Washington businesses, the Tax Foundation says our state is ranked sixth. Only Wyoming, South Dakota, Nevada, Alaska and Florida are less burdensome for businesses, the foundation says. Washington has maintained that rank for three years running.

The worst states are New York, New Jersey and California.

You can download the full report here.

“The absence of a major tax is a dominant factor in vaulting many of these states to the top of the rankings,” the report says. “Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax.”

In Washington’s case, of course, there is no personal income tax. That’s attractive for Washington-based companies competing for talent. But when ranking the states based on sales-tax burden, Washington is 48th. And based on corporate taxes alone, we are 30th.

The Tax Foundation cautions:

State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. This can be a dangerous proposition, as the example of Dell Computers and North Carolina illustrates. North Carolina agreed to $240 million worth of incentives to lure Dell to the state. Many of the incentives came in the form of tax credits from the state and local governments. Unfortunately, Dell announced in 2009 that it would be closing the plant after only four years of operations. A 2007 USA Today article chronicled similar problems other states are having with companies that receive generous tax incentives.

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 tax climate. A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.

Here’s the complete list:

FY 2014 state business-tax climate index

Note: A rank of 1 is more favorable for business than a rank of 50. Rankings do not average to total. States without a tax rank equally as 1. D.C. score and rank do not affect other states. Report shows tax systems as of July 1, 2013 (the beginning of Fiscal Year 2014). SOURCE: Tax Foundation