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Tuesday, October 26, 2010

2011 Business Tax Climate: Chilliest in Blue States

The Tax Foundation today released the 2011 State Business Tax Climate Index (8th ed.) 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

North Carolina

2

Alaska

42

Rhode Island

3

Wyoming

43

Minnesota

4

Nevada

44

Maryland

5

Florida

45

Iowa

6

Montana

46

Ohio

7

New Hampshire

47

Connecticut

8

Delaware

48

New Jersey

9

Utah

49

California

10

Indiana

50

New York

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 (and eight of the ten voted for George Bush in 2004).

SBTC 

https://taxprof.typepad.com/taxprof_blog/2010/10/2011-business.html

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Comments

Funny how America's engines of commerce (NY, NJ, CA) are ranked poorly and states that contribute next to nothing to the country's GDP are ranked well. It almost seems to suggest that there's correlation between higher taxes and having a first world economy.

Maybe if the well-ranked states weren't sucking down my federal tax dollars (http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html) I could have lower taxes in CA.

The least you red staters could do is send me a thank you note for my tax dollars.

Posted by: Nolo Contendre | Oct 29, 2010 3:56:55 PM

@ moptop - right quote, wrong source. I never said those words, Nick did. Please attribute accurately.

@ A to the F - here's the article (http://www.latimes.com/business/la-fi-adv-biz-taxes-20101024,0,3837807.story). You may choose to disagree or mock, I don't care, since I wasn't taking a position on the article, just the interesting juxtaposition of one article which says CA ain't so bad, and another which calls it one of the worst in the country. Now, I will point out that the article DOES say more $$ has come from individual taxes, not business, so it may ultimately be six of one, 1/2 dozen of the other.

Posted by: TaxHacker | Oct 28, 2010 8:58:05 PM

NH voted for Obama, but prior to the 2000s it was a reliably conservative state. It's swung somewhat to the left with a lot of transplants from Massachusetts (come for the low tax rates), but the state is still very hostile to the idea of income or sales taxes. Also, it's likely to swing back towards the right with this election.

Posted by: Seth | Oct 27, 2010 6:49:45 PM

"Luckily, Apple makes products that people want. Therefore, my job is most likely secure."

Don't count on it.

NOTHING Apple makes is required for survival. People may want those shiny toys but when it comes right down to it no one needs them to survive. When it comes down to a choice between a roof over your head and food on the table or the newest iPhone/iPod/iPad/iWhatever the vast majority will choose the roof and food. People will either make do with what they have or buy a phone that meets the minimum requirements with the cheapest plan possible.

Of course there will always be fools who will buy the shiny toys because they "have to have it" only to find that six months down the road they may have a nice cell phone and are living under a bridge or in a tent down by the river. My brother is a poster child for that one, both he and his wife "had to have" their bright, shiny iPhones-they are now living in their truck. The reason why they are living in their truck is that they gave us a big sob story about how they were short on their electric bill and the rent because of "medical expenses" so we loaned them the money to cover it. That was just the latest of the sob stories they have used to borrow money from us only to find that they used the money to buy toys and not to pay bills. They used that money to buy their iPhones instead and got their electricity cut off 5 days after they got their phones and were evicted 4 weeks later. They also have not paid their medical bills so my brother's wife better hope her pace maker keeps working because the doctor and hospital are suing them.

They were so proud of their new iPhones that they dropped by to show them off two days after we loaned them the money and that was the last straw for all of us. Those phones are very useful to them now-they could not afford their cell phone bill and their shiny iPhones are now little more then paperweights.

Posted by: Nahanni | Oct 27, 2010 5:24:58 PM

@Skree: "Apple has BILLIONS...overseas. Money they will not re-patriate."

Exactly. Those wondering why this year's returns of the S&P500 do not seem to reflect the anemic U.S. economy should take note of the Standard and Poors July 2009 report:

“Of the reporting issues, 47.9% of all (2008) sales were produced and sold outside of the United States, up from 45.8% in 2007 and 43.6% in 2006….Taxes paid to the U.S. now represent a minority of income taxes paid by U.S. companies.”

http://www2.standardandpoors.com/spf/pdf/index/2009_JULY_SP500.pdf

Posted by: grichens | Oct 27, 2010 12:02:25 PM

"And unfortunately, there is no way to directly measure the jobs created OUTSIDE a given jurisdiction that otherwise might have been created inside, had the regulatory/tax climate been different."

Sure there is. Just apply the Obama team's "Jobs Saved by Stimulus" formula/model. You'll easily determine that there are trillions of potential jobs lost every time a corporation or business relocates to a state with a lesser tax burden.

Posted by: The False God | Oct 27, 2010 10:50:47 AM

Janus Corporate Solutions:
"Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempt from further taxation.

There is no tax on capital gains in Singapore."


Wikipedia:
"Singapore's economy has been ranked amongst the world's ten most open,[62] competitive[63] and innovative.[64][65] Rated as the most business-friendly economy in the world"

"The Economist Intelligence Unit in its "Quality-Of-Life Index" ranks Singapore as having the best quality of life in Asia and eleventh overall in the world.[21] Singapore possesses the world's ninth largest foreign reserves.[22][23] The country also maintains an armed forces that is technologically advanced and well-equipped.[24][25]"

"After a contraction of -6.8% in the 4th quarter of 2009,[26] Singapore claimed the title of fastest-growing economy in the world, with GDP growth of 17.9% in the first half of 2010.:"

What was that you were saying Nick?

Posted by: william | Oct 27, 2010 10:20:25 AM

Comparisons of tax rates and qualities of life between countries are disingenuous here.

In THIS case we're talking about different jurisdictions within the SAME COUNTRY. Its effectively an internally controlled measurement. EG, are there dramatic differences in "infant mortality", "war and conflict", etc between say New Hampshire (ranked #7) and nearby Rhode Island (ranked #42)?

For Dr. K, just because a particular jurisdiction may be friendly to SOME businesses (particularly super-large and/or politically connected ones), doesn't make it "business friendly" in general. Super-large companies actually BENEFIT from regulatory burden, since it tends to disproportionately impact small companies and start-ups (which happen to be the engine of new job creation), and therefore stifles competition.

And unfortunately, there is no way to directly measure the jobs created OUTSIDE a given jurisdiction that otherwise might have been created inside, had the regulatory/tax climate been different.

Posted by: Looking closely | Oct 27, 2010 10:12:34 AM

Montana has the highest work comp rates, FWIW.

http://tinyurl.com/2cedto7

Posted by: carol | Oct 27, 2010 10:12:31 AM

Thanks to Nick I finally figured out our progressive income tax system: The reason rich people are so rich is because they have higher tax rates! So if you want to "spread the wealth" just increase the tax rate on the poorest!

Posted by: peterargus | Oct 27, 2010 9:50:30 AM

Using Nick's argument, a 100% tax rate should lead to utopia. oh wait, we already call that theory Obamanomics.

Posted by: Tigram | Oct 27, 2010 9:29:19 AM

Michigan is 17th best? That seems VERY hard to believe.

Posted by: Chester White | Oct 27, 2010 9:22:17 AM

Hi Nick.
Singapore, Hong Kong, Korea. All very low corp tax rates. All great countries to live and work in.

:][:

Posted by: Rorschach | Oct 27, 2010 9:14:58 AM

"Go on, do the calculations. And then decide which is "best" and "worst" on that basis." - TaxHacker

Well, apparently you already have, so why not share?

Posted by: moptop | Oct 27, 2010 9:14:16 AM

There are business regulations in Indiana now?

Posted by: Kirk Freeman | Oct 27, 2010 9:13:05 AM

Relying on the LATimes for business reporting? Now that's funny!

Posted by: A to the F | Oct 27, 2010 8:57:25 AM

I work @ Apple. I can tell you this...Apple has BILLIONS...overseas. Money they will not re-patriate. THAT is one of the major ways companies in Cali manage to stay afloat. Luckily, Apple makes products that people want. Therefore, my job is most likely secure.

Posted by: Skree | Oct 27, 2010 8:24:53 AM

"if you survey the countries of the world, that those countries with the lowest taxes..."

@Nick: or YOU could source this comment without throwing it out there as if it is some kind of legitimate argument for your point of view. Why should anyone else have to run data to prove YOUR point.

Posted by: Tom in GA | Oct 27, 2010 8:21:10 AM

"while the highest tax countries are the most competitive and the best in every other indicator that matters."

You mean like Greece?

Posted by: edword | Oct 27, 2010 8:12:36 AM

Nick obviously nailed it. Those countries with the lowest income per capita, the highest degree of war and conflict, the worst infant mortality, the least competitive industries, and so on just need to raise their taxes and - presto - instant Garden of Eden. Methinks Nick doesn't quite grasp cause and effect.

Posted by: Steve-O | Oct 27, 2010 7:59:12 AM

Here in Los Angeles we now have 13.7% unemployment and a K-12 that graduates around 40%.

We may not have business or jobs...but we have social justice and sunshine.

Posted by: Army of Davids | Oct 27, 2010 7:51:25 AM

Why not report on this dispassionately, rather than with the Tax Foundation's spin on it? Why use the words "best" and "worst?" Why "chilliest." You will find, if you survey the countries of the world, that those countries with the lowest taxes are those with the lowest income per capita, the highest degree of war and conflict, the worst infant mortality, the least competitive industries, and so on, while the highest tax countries are the most competitive and the best in every other indicator that matters. Go on, do the calculations. And then decide which is "best" and "worst" on that basis.

Posted by: Nick | Oct 27, 2010 5:08:42 AM

It certainly doesn't compute, particularly when you consider the front page article of this past Sunday's LA Times, which shows that California IS favorable to business. Companies such as Apple, Google & Oracle all paid little to no income tax, and numerous other credits & benefits exist which can bring down the tax bite considerably.

Certainly California does take a bite out of smaller companies, but I think the research is flawed..

Posted by: TaxHacker | Oct 26, 2010 2:13:25 PM

We're #1.

For WORST, that is.

Posted by: Dr. K | Oct 26, 2010 11:28:56 AM

Ohio is worse than Michigan?

This does not compute.

Posted by: save_the_rustbelt | Oct 26, 2010 10:36:44 AM