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

State Overall rank Corporate tax rank Individual income tax rank Sales tax rank Unemployment insurance tax rank Property tax rank
Wyoming 1 1 1 14 31 34
South Dakota 2 1 1 34 37 18
Nevada 3 1 1 40 42 9
Alaska 4 28 1 5 29 25
Florida 5 13 1 18 6 16
Washington 6 30 1 48 20 23
Montana 7 16 19 3 21 8
New Hampshire 8 48 9 1 46 42
Utah 9 5 12 20 18 4
Indiana 10 24 10 11 13 5
Texas 11 38 7 36 14 35
Oregon 12 32 31 4 34 15
Delaware 13 50 28 2 2 13
Michigan 14 9 14 7 44 28
Tennessee 15 14 8 43 27 37
Missouri 16 7 27 26 9 7
Mississippi 17 11 20 28 5 32
Idaho 18 18 23 23 47 3
Colorado 19 21 15 44 28 22
Kansas 20 37 17 31 12 29
Alabama 21 19 22 37 15 10
Arizona 22 26 18 49 1 6
West Virginia 23 20 24 25 26 27
Pennsylvania 24 46 16 19 39 43
Massachusetts 25 34 13 17 49 47
Virginia 26 6 37 6 35 26
Kentucky 27 27 29 10 48 17
North Dakota 28 22 38 21 19 2
Maine 29 45 21 9 33 40
Hawaii 30 4 35 16 38 12
Illinois 31 47 11 33 43 44
Georgia 32 8 41 12 24 31
Louisiana 33 17 25 50 4 24
Nebraska 34 36 30 29 8 39
Arkansas 35 39 26 42 11 19
Oklahoma 36 12 39 39 3 11
South Carolina 37 10 40 22 30 21
New Mexico 38 40 34 45 17 1
Ohio 39 23 44 30 10 20
Iowa 40 49 32 24 36 38
Maryland 41 15 46 8 40 41
Connecticut 42 35 33 32 23 49
Wisconsin 43 33 43 15 25 36
North Carolina 44 29 42 47 7 30
D.C. 44 35 34 41 26 44
Vermont 45 42 45 13 22 48
Rhode Island 46 43 36 27 50 46
Minnesota 47 44 47 35 41 33
California 48 31 50 41 16 14
New Jersey 49 41 48 46 32 50
New York 50 25 49 38 45 45

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

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