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Wednesday, September 23, 2009

2010 State Business Tax Climate Index

The Tax Foundation has published its 2010 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1

South Dakota

41

Vermont

2

Wyoming

42

Wisconsin

3

Alaska

43

Minnesota

4

Nevada

44

Rhode Island

5

Florida

45

Maryland

6

Montana

46

Iowa

7

New Hampshire

47

Ohio

8

Delaware

48

California

9

Washington

49

New York

10

Utah

50

New Jersey

Interestingly, all ten of the states with the worst business tax climates voted for Barack Obama in the 2008 presidential election, and five of the ten states with the best business tax climates voted for John McCain (South Dakota #1, Wyoming (#2), Alaska (#3), Montana (#6), and Utah (#10)).

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https://taxprof.typepad.com/taxprof_blog/2009/09/2010-state.html

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Comments

I did my own examination between economic freedom and economic performance. I looked at states with similar geographies but sizable differences in levels of economic freedom. If anyone is interested you can take a look here:

http://togetrichisglorious.blogspot.com/2009/08/determinants-of-economic-growth-ii.html

Posted by: Colin | Sep 25, 2009 8:41:45 PM

"Its interesting that the places people actually prefer to live are supposedly bad for business."

It's not really all that interesting. First, of the bottom 10 states, which do people actually want to live in? Maybe 2 of them: California and New York, and more people are leaving those states than moving in.

Second, not all of these states have always been bad for business.

Third, traditionally, business located where people are, not the other way around. So, places like New York and California drew businesses in because they had large populations already. Today, the workforce is much more mobile. Many companies can locate anywhere and pretty much have a city develop around them (if they're large enough).

Fourth, nicer places to live can afford to have worse business environments. Ohio and Michigan cannot afford to be as hostile to business as California.

Finally, where people live is based on a variety of factors, not least of which is where they grew up. There is no particularly logical reason I can think of why anyone would necessarily want to live in New York instead of say, North Carolina (I would prefer NC myself), except for entirely historical reasons. New York has New York City. If it didn't, I doubt all that many people would want to live there.

So, no, it's not particularly interesting.

Posted by: Jason | Sep 25, 2009 11:34:05 AM

How is MA as high as #36???? They just raised the sales tax and have the business mandate for health insurance and will implement mandatory 7 day paid sick leave - thanks for the extra 7 paid vacation days Deval!

Posted by: Bandit | Sep 25, 2009 5:41:06 AM

All I know is there are a ton of shuttered California businesses along the tony sections of Pacific Coast Highway from Torrance to Redondo Beach to Hermosa Beach to Manhattan Beach and El Segundo.

Worst I have seen in 50 years living here.

The helpful answer from our California legislature?

Raise sales tax to 10.25%.

Yeah, that'll spur revenue and business growth....

Posted by: Koblog | Sep 25, 2009 2:38:25 AM

I've heard people in NH refer to those Kennedyesque immigrants as Massholes. I think states becoming home to fleeings Californians are less creative in how they refer to said Californians.

Posted by: Roger Godby | Sep 24, 2009 11:22:58 PM

save_the_rustbelt,

The difference is the quality of people over the quantity of people.

Rust Belt states=Unions, "community activists", high taxes, stupid business laws and corrupt state governments.

The Dakotas/Wyoming=Hard working people, right to work states, the closest you come to having a "community activist" are local church charities, low to no income tax, laws that encourage businesses and sound state governments.

BTW-If the rust belt states want to be "saved" they should look at the end of their own arms and use the hand at the end of their arms to vote out their corrupt governments.

Posted by: Nahanni | Sep 24, 2009 10:45:13 PM

CA's most important industry, technology, is dependent on Asians.

When the CA business climate gets too anti-business, these Asians do not move to Texas and Nevada. They move to Asia. And they take the knowledge-based tech industry with them.

So making CA unfriendly towards business does not benefit low-tax states - it merely causes a net loss for the nation.

The same goes for NY's most important industry - finance. A lot of financial activity is moving to London, Hong Kong, and Dubai. It is not moving to a low-cost US state.

Posted by: wombly | Sep 24, 2009 9:49:41 PM

"Its interesting that the places people actually prefer to live are supposedly bad for business."

Which 'people'? Public sector employees of zero productivity?

I don't know anyone who wants to live in NJ. Plus, for all the hoopla about California, all the states that border CA have a higher growth rate than CA. This is even more stark if you exclude the illegals.

CA is a dramatically worse place to live than it was just 10 years ago. It used to be the best place in the world. Now, it is scarcely better than Mexico in terms of quality of life (Mexico also has good weather).

Posted by: wombly | Sep 24, 2009 9:42:56 PM

Did someone comment that my state wasn't beautiful?

Henry O: "Its interesting that the places people actually prefer to live are supposedly bad for business."

New Jersey? Come on, dude!

Posted by: Denny, Alaska | Sep 24, 2009 6:58:59 PM

Sarah, he ultimately means "cool people." Nothing more.

New Hampshire was a red state until very recently. Our growth has included many people from Massachusetts, however, not all of whom understood why there were miraculously more jobs in NH.

Posted by: Assistant Village Idiot | Sep 24, 2009 5:07:24 PM

Whoa, Texas dropped out of the top 10! It was 5 for a long time, tied with Florida, then its obnoxious gross receipts tax dropped it to 7 the last couple of years.

Posted by: Bob Smith | Sep 24, 2009 5:04:04 PM

One of the reasons companies don't completely move is that they need something the local workforce has that isn't easy to find elsewhere, ie if you're a trading company and have a complex contract issue to deal with, you may need lawyers who speak Mandarin and Cantonese, and know the legal systems of both the US and China; ideally, they've passed the bar in both countries. It's not that hard to find such people in the Bay Area, but they rarely live in Salt Lake City or Wyoming.

The unfriendly bits of tax and regulation hit manufacturing or low-end service businesses far worse than they hit higher-end service companies, which have fewer, more highly skilled employees and can do things like incorporate elsewhere to avoid nastier regulations. Many companies in places like Silicon Valley have a HQ staff of senior managers and techies here, with call centers or other operations in the Midwest somewhere, and other operations in India or China.

The people who get hurt most by high taxes on business are lower-skilled American citizens.

Posted by: Foobarista | Sep 24, 2009 4:09:59 PM

That #11 ranking for Texas is unfortunate. Intending no disrespect to the other states listed ahead of it, and not even quibbling with the substance of the rankings, but Texas' economy, population, geography, private and public infrastructure, transportation hubs, and (consequently) overall prospects are vastly larger, in virtually every respect, than those of states like Wyoming, South Dakota, Delaware, or New Hampshire.

I'm not suggesting any of those states, nor the others ahead of Texas on the list (including fellow big-state Florida), are bad places by any means. Florida, however, has a unique set of challenges and problems -- especially demographic ones -- independent of its business taxes and overall receptivity to business interests.

I had occasion to rent a U-Haul truck to help my son's girlfriend move from San Francisco to Houston in August. As always, U-Haul's relative rental rates tell a lot: If I'd rented the same truck to go from Houston to S.F., it would have cost me only $650, but going from S.F. to Houston -- based on the much greater demand for trucks to LEAVE S.F. -- cost me over $1300.

Texas is far from the only place where the American work ethic still prevails and the American dream is still dreamed -- and realized -- on a daily basis. But we have an awful lot of businesses, and business people, of all sorts who hold those things dear and who are collected here in this great state.

Posted by: Beldar | Sep 24, 2009 4:07:39 PM

The amenities off a city on the coast like... homelessness, medical marijuana, smug lefties, ACORN and Union dominated politics, elites on the hilltops and their servants in the valleys. Yeh it's great here in California - that's why people are fleeing the state and we still have a busy foreclosure crisis..

Posted by: DirtCrashr | Sep 24, 2009 4:04:08 PM

I'm surprised HI ranked as high as it did, given the 11% state income tax. A search through the PDF doesn't bring up any references to the General Excise Tax, and they also don't count the Jones Act; while the latter is levied by the federal government, it's effectively a massive tax on Hawaii that's collected by the shipping industry.

Posted by: Brad | Sep 24, 2009 3:24:46 PM

Sarah,

Shh! Don't let the cat out of the bag on SLC! We don't want the traffic jams, smog, crime, and other amenities here that the other major cities have.

Let's keep it under our hat, ok?

Posted by: Joe | Sep 24, 2009 3:17:11 PM

My native KS is #32 and falling. Oh well, we sent our Loser Liberal governor off to Washington to do the the country what she did to KS. Sorry everyone.

Posted by: prairie_dog | Sep 24, 2009 2:55:16 PM

Sarah,
I think by "amenities", Allan means a lot of places where twenty-somethings can go to drink, listen to loud music, and swap STDs.

Posted by: Sam | Sep 24, 2009 2:29:50 PM

Regarding the question about related unemployment rates, from the BLS website:
http://www.bls.gov/news.release/laus.nr0.htm
calculate (unweighted) average employment rate as 8.05% for pro-business states,
and 9.24% for anti-business states.

Posted by: John Golob | Sep 24, 2009 2:28:37 PM

Allan: "I would ask, if the tax climate is so important, why don't more companies move their headquarters from LA, SF, DC, and NY to... Salt Lake City? 'Cause they do not have the amenities of a city on the coast perhaps?"

Dude, have you not been to Salt Lake City? We had Olympics here, you know. The recession's hit us in much the same way a bug hits the windshield.

Of which amenities do you speak? Light rail? Check. Opera? Check. Great restaurants? Check. International airport? Check. Tourist attractions? Check.

Unless by "amenities" you mean things like traffic, smog, and restaurants so expensive that only elites like yourself can afford to go there. If that's what you mean, then yes, Salt Lake City lacks "amenities".

Posted by: Sarah Natividad | Sep 24, 2009 2:12:19 PM

Its interesting that the places people actually prefer to live are supposedly bad for business.

Posted by: Anonymous | Sep 24, 2009 2:11:00 PM

Whenever Minnesota's legislature rattles the tax-increase saber, Sioux Falls, S.D., advertises on Twin Cities radio, encouraging firms to move to South Dakota. The ads offer good schools and medical care, modest prices and a short commute. We must lose some businesses, because Sioux Falls keeps advertising. Some Minnesotans change residence states--primarily to Florida--when they retire. They must be out of Minnesota for six months plus one day to qualify--and Minnesota apparently keeps tabs, somehow. Neighbors recently drove from Minneapolis to western Wisconsin just to meet the non-residency requirement.

Posted by: Henry O | Sep 24, 2009 1:09:45 PM

J.Pickens, are you really complaining that the TAX Institute's Business TAX Climate Index was too focused on... Taxes??

And, why don't big businesses move? Well, the reality is that this Climate index shows the impartial tax climate. For most big business, through corruption and "special tax breaks" targeted to them, their personal tax climate in a given state can be a *LOT* better than that of a hypothetical new company.

So, instead of looking at where big, entrenched businesses stay, why not look at where new companies are forming? I think you'd find that they're gravitating towards these places with the best business tax climate...

Posted by: Matt Knowles | Sep 24, 2009 1:04:35 PM

Both have more cattle than people. Both beautiful to visit though.
Well, not really. Both have nice parts, but overall, not the most scenic of states.

Much of Wyoming, in particular, is desolate. You might have expected that state to do much better than Colorado just south of it, since it got the trans-continental railway, and Colorado was, for quite awhile, except through, for example, Cheyenne, cut off from east-west rail traffic. But Colorado now has many times the population of Wyoming. Why? From an entirely prejudiced point of view (as a Colorado native), because people like living in Colorado, and don't like living in much of Wyoming.

But the reality is that not a lot of people want to live in most of the state, and you really can't raise that many cattle their either. But what it does have is a lot of extractable natural resources, and even more, if their oil shale deposits could be mined.

Posted by: Bruce Hayden | Sep 24, 2009 12:31:07 PM

Read here why government is set to extinguish Silicon Valley, and the entire US tech sector.

Posted by: GK | Sep 24, 2009 12:26:44 PM

Tax climate is vitally important, and rational business leaders eventually decamp from the states in which they're punished. California businesses have been defecting to Texas in droves. We bought a company, shipped it to Texas and immediately made it about 1/3 more profitable through a combination of tax savings and paying the employees in proportion to the local cost of living.

Voters are not identical. The good ones want opportunities to work hard and produce goods and services others will pay for. The bad ones want government to take away the income of others and redistribute it to themselves.

Government should be forced to become ever more efficient, providing more value with less resources. There's no reason this can't be done, same as corporations do all the time.

Posted by: Jonathan | Sep 24, 2009 12:25:08 PM

I am surprised Texas isn't higher.

But California is a disgrace. Read here why government is set to extinguish Silicon Valley.

http://www.singularity2050.com/2009/01/why-government-is-set-to-extinguish-silicon-valley.html

Posted by: GK | Sep 24, 2009 12:24:41 PM

Concerning Ohio, the key thing about it is until recently (last 3 years) the state has had Republican House, Senate and Governor. Only since 2006 have Democrats gained the Governor, and since 2008 the House. Republicans still hold a slight edge in the Senate. During the time of Republican rule, the business climate rating slipped from good (`13th) to the awful rating today.

Two things I can glean out of this:
(1) Term limits, although a good concept, failed miserably here. The power shifted from the actual (term-limited) legislature to the entrenched lobbyists. Of course, you must put that blame on the legislators themselves.
(2) Electing Republicans alone does not make for good or even smaller government. The RINOs tended to grow government at a lighter pace than Democrats, meaning it is a slower death than one gets with Democratic control.

Posted by: pablo panadero | Sep 24, 2009 12:04:53 PM

It is not interesting. Tax business climate is likely based upon .... tax rates. Tax rates are determined by .... legislatures. Legislatures are elected by .... voters. And the voters in those states like taxes not at all (they may also shy away from government provided services because taxes are not high enough to provide them).

I would ask, if the tax climate is so important, why don't more companies move their headquarters from LA, SF, DC, and NY to Cheyenne, Billings, Bismark, and Salt Lake City? 'Cause they do not have the amenities of a city on the coast perhaps? And perhaps they do not have the amenities because they cannot pay for them. A death spiral.

In sum, the tax foundation's criteria are a bogus ranking system for anything but determining the bottom line on taxes.

Posted by: Allan | Sep 24, 2009 12:01:56 PM

New Jersey Leading the Nation!!
Wooo Hoo!!!!!

Posted by: j.pickens | Sep 24, 2009 12:01:30 PM

It would be interesting to see how this correlates to unemployment rates. I know SoDak has been very low.

Posted by: bcw | Sep 24, 2009 11:59:03 AM

The 9 US states without a personal income tax and where they rank on this list:

1. South Dakota
2. Wyoming
3. Alaska
4. Nevada
5. Florida
7. New Hampshire
9. Washington
11. Texas
22. Tennessee

Posted by: Dar | Sep 24, 2009 11:57:19 AM

How in the world did Michigan end up at #17?

Posted by: jeff | Sep 24, 2009 11:56:18 AM

Oh Texas, you missed it by 1 spot!! Let's lower those property taxes and be #10 next year. heh On the bright side, our state isn't flat broke. woo!

Posted by: amy | Sep 24, 2009 11:45:29 AM

Not surprising findings . . .

However . . .

To tie those states with the most hospitable business climate to McCain is to do them a disfavor.

I mean, what choice did they have, after ruling out the Bammeister?

None. As if McCain was really a choice. He was just the other big government guy who wanted to be President.

Posted by: jb | Sep 24, 2009 11:45:24 AM

Business climate has nothing to do with population. I think you know that.

Here in Nevada, we rank #3 in unemployment yet fourth best business climate. Such is the result of dependence on an economy with limited diversification (gaming, tourism, mining, construction).

Posted by: sestamibi | Sep 24, 2009 11:44:43 AM

Irony thy name is: save_the_rustbelt

Posted by: monkeyfan | Sep 24, 2009 11:38:53 AM

In the 5 other good business states how big was the margin for Obama?

Posted by: Mark | Sep 24, 2009 11:37:48 AM

Ohio worse than Michigan? Huh.

I'm always amused when South Dakota and Wyoming lead these sorts of surveys. The total population of both is _________? Both have more cattle than people. Both beautiful to visit though.

Posted by: save_the_rustbelt | Sep 23, 2009 7:47:12 PM