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