Posted on 11/12/2004 7:40:41 AM PST by BlueStateLiberal
News Release
October 14, 2004
Study Finds Some States Have Business-Friendly Tax Climates, Some Don't
In the wake of new government data showing that job relocation to other states is twice as common as "outsourcing" abroad, a new Tax Foundation study examines the role of attractive state business tax climates in the shifting of economic activity.
“States do not enact tax changes in a vacuum,” said Scott Hodge, president of the Tax Foundation and co-author of the study. “Every tax change will affect a state’s competitive position relative to its neighbors, as well as globally.”
The new study, “State Business Tax Climate Index,” ranks the 50 states on how “business friendly” their tax systems are, providing a roadmap for state lawmakers concerned with keeping their states tax-competitive.
The goal of the index is to focus lawmakers on good-tax fundamentals in their states, rather than short-term tax abatements and exemptions designed to temporarily lure high-profile companies, baseball teams, and auto plants from other states.
“The temptation is for state lawmakers to lure high-profile companies with packages of tax bonuses,” said Hodge, “but that strategy can backfire.”
For example, in 2000 officials in Columbus, Ohio, lured a moving company with a 5-year package of tax goodies. In 2004, the company had not only failed to add 100 jobs as promised, but it had actually fired 98 employees, sending lawmakers into a panic to yank the final year of tax breaks.
“Ohio’s experience shows preferential tax bonuses don’t guarantee jobs will stay permanently,” said Hodge. “Often they mask deeper flaws in state taxes. The Tax Foundation’s new State Business Tax Climate Index helps draw those to lawmakers’ attention.”
Even states with excellent business tax climates trot out extra tax incentives. In 1996 Florida lawmakers lured a major credit card company to open a call center with a generous $4 million tax refund package. But earlier this year lawmakers were shocked at the announcement that the company was closing the Tampa call center and laying off 1,100 workers.
Best and Worst Tax Climates
Generally the index rewards tax codes that are neutral, have low and flat rates, are simple and transparent, avoid double taxation, and have statutory or constitutional restraints that keep tax burdens low over time. See Tables 1 and 2 here for the overall results.
The ten states that began 2004 with the most business-friendly tax systems are: South Dakota, Florida, Alaska, Texas, New Hampshire, Nevada, Wyoming, Colorado, Washington and Oregon.
“Nearly all of the best states raise sufficient revenue without imposing at least one of the three major state taxes—sales taxes, personal income taxes and corporate income taxes,” said Hodge. Four of the top 10—Alaska, South Dakota, Washington and Wyoming—have only one of the three.
The ten states with the least hospitable business tax climates are: Hawaii, New York, Minnesota, West Virginia, Rhode Island, Vermont, Kentucky, Arkansas, Maine and Wisconsin.
The worst state tax codes tend to have:
• complex, multi-rate corporate and individual income taxes with above-average tax rates;
• above-average sales tax rates that don’t exempt business-to-business purchases;
• complex, high-rate unemployment tax systems; and
• high overall state tax collections with few tax or expenditure controls.
“The ideal tax system, whether at the state, federal, or international level, should be neutral to business activity,” said Hodge. “In such a system, people would base their economic decisions on the merits of the transactions rather than the tax implications.”
How it Works
The methodology of the State Business Tax Climate Index is centered on the idea of economic neutrality. If a state’s tax system maintains a “level playing field” for businesses, the index considers it neutral and ranks it highly. However, each state’s final score depends on a comparison with the other 49 states.
The overall index is composed of five specific indexes devoted to major features of a state’s tax system: the corporate income tax, the individual income tax, the sales or gross receipts tax, the unemployment insurance tax, and the state’s fiscal balance. These five indexes are themselves composed of several sub-indexes. Overall, the index consists of 5 specific indexes, 10 sub-indexes, 33 categories and 109 variables.
Each state’s laws and tax collections were assessed as of January 1, 2004, and therefore reflect the business tax climate for the current year, but without consideration of 2004’s legislative action. While the index is comprehensive, it is not exhaustive. Future research into state taxation will lead to new variables and sub-indexes in future editions of the index.
Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
Some things I stole so long ago I can't remember where I stole them.
Bwahahahahaha!
Yeah, right. Tell that to my husband who has to run to keep up with me.
I don't miss dial up.
Inbreeding.
That makes two of us.
moron=moran. This is the way its spelled in DUmmieland. Excuse me, I've got to go listen to Rush, now.
"He's not my President."
OF COURSE he isn't your president Nigel.
YOU'RE a subject of the British crown.
Little do you socialists/communists know of what a Christian does or what it means. Might help you to do a little research and attend a church some time.
"darkies?" I've only heard that term used in England. Why don't you work on fixing your own dying, enervated culture. Here's a hint: "safety nets" won't do it. And don't be asking us for more guns when the Mahometans go off the farm.
Counties don't have electoral votes. Good thing for you or you would lose even worse!
The 9/11 thugs created mass destruction with boxcutters. The minds of the terrorists are weapons of mass destructions. And our great President Bush is taking care of them as we type.
Maybe we should call it sharing since the person you steal it from can still use it too!
Ouch! Thats like holding a cross up in front of a vampire.
I have opened a book. I just finished Unfit for Command. Shame on your silly commie candidate.
Darkies?!?! What a bigoted person you are. Some of our finest people are black. You are the bigoted one!!
Know what? You look them up. You brought this inane crap up, you prove it! Link it man! You're so much smarter than us idiots that shun toothpaste and hang "nothin spells lovin' like marryin' yer cousin" hand-weaved signs around the trailer. So surely, linking to these facts wouldn't be too much of a mental strain for you!
God, I just pray us stupid-a**, slack-jawed yokels are intuitive enough to be able to read them fancy werds that follow when ya click on them thar blue links! [/sarcasm]
Honestly, I'm an atheist and I voted for Bush. I graduated from High School with a 3.2 GPA , and I attend college. I'm not opposed to gay marriage. If there's a de jure theocracy here in the South (North FL for me), then it's pretty weak, because I have yet to be burned at the stake for my lack of belief. I know, I know, they're supposed to do that without control, like animals, that's what the Left told me too, but it's actually a steaming load of horse crap. The women behind by 3 feet rule is also more Arabic/Islamic that Christian. When I attended church as a little kid, my goodness, we even had female priests! It's my understanding that in most Islamic sites of worship, women are at the back, and must remain silent. Compare and Contrast.
Talking to conservative americans like children pisses them off, especially if they've bled for your right to freedom of speech, that YOU SCUMBAGS MISUSE TO DENIGRATE OUR BELOVED NATION. You seem to think you're smarter than us, so analyze this: The country to the North of us practices most of what you people preach. We've no place to go. If you want this country, it is over our dead bodies. We've got the guns, and we actually shoot them on a regular basis. Just get the F out already, we'll both be happy.
Can I question your patriotism yet? Or are you starting with the "How DARE you!" crap already? Ripping on me is fine, I smile when commies like you go nuts, it's vindication. When you go for this country, you're walkin on the fighting side of me.
Uh oh, guess I couldn't supress the redneck for too long! Duhrrr!
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