United States

Multistate: Tax Foundation Issues 2017 Business Tax Climate Index Report

Oct 03, 2016
From KPMG TaxWatch

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This week the Tax Foundation released its 2017 State Business Tax Climate Index. This annual study seeks to measure each state’s business tax climate and ranks each state on the degree to which its tax structure is seen as conducive to business investment and operation. Although the report notes that taxes are but one factor in business decision making, the evidence shows that a state’s tax structure can influence the degree to which a state is competitive in attracting new business and generating economic growth. The study compares the states on five aspects of their tax systems and uses the results to rank each state. The five taxing regimes analyzed are the state’s (1) corporate income or major business tax, (2) individual income tax, (3) sales and use tax, (4) unemployment insurance, and (5) property tax. With respect to a state’s corporate income tax, the Tax Foundation primarily analyzes two factors when ranking the states—the corporate tax rate and the corporate tax base. Generally, a state scores well if it has a relatively low, single-rate system that applies to a broad base of business activity. Poor scores result from states that have a complex, multi-rate system with a high top marginal rate. In evaluating sales taxes, a state generally scores well if the combined state and local rate is low, and it allows exclusions for business inputs. The top ten states for 2017 (i.e., having the best business tax climate) in this year’s index (in order) are Wyoming, South Dakota, Alaska, Florida, Nevada, Montana, New Hampshire, Indiana, Utah, and Oregon. Utah and Indiana are the only states in the top ten that have both a sales tax and a personal income tax. The bottom ten states in order are Louisiana, Maryland, Connecticut, Rhode Island, Ohio, Minnesota, Vermont, California, New York, and, finally, in very last place, New Jersey. Louisiana was new to the list of the bottom ten states - most likely due to the temporary new one percent sales and use tax and other tax increases designed to address recent budget shortfalls. Also, last year North Carolina jumped from 44th place to 15th in the rankings. This year, the state was ranked 11th likely due to further corporate rate reductions and upcoming personal income tax rate reduction.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.