Where companies originally locate and relocate to are obviously potentially complex decisions given the vast number of variables such as customers, taxes, resources, transportation, environment, weather, demographics, and workforce, to name just a few. Yet sometimes it may be just as simple as locating where the CEO or owner wants to live.
From a tax perspective, the Tax Foundation, a non-profit in Washington, D.C., annually ranks and compares all 50 states based on business-tax friendliness.
The taxes included in their study are:
- Corporate Income Tax
- Individual Income Tax
- State Sales Tax
- Unemployment Insurance Tax
- Property Tax
The top ranking states often completely omit one of the five tracked taxes. Three states, for example, have neither a personal nor corporate income tax – Nevada, South Dakota and Wyoming. Montana and New Hampshire have no sales tax, and Alaska no income or sales tax (at the state level). Lack of a single tax, however, does not assure overall low net taxes. Texas, while essentially free of a personal income tax, has comparably high state-level sales and property taxes.
A high ranking does not necessarily imply a growing, booming economy. Wyoming, for example, ranks number one in State Business Tax Climate in the Tax Foundation analysis, but in a year-over year comparison in job growth ranks only 38th best among all states. A high ranking in the State Business Tax Climate Index does ease the burden on businesses located within those states, and when conducive with the other factors in relocating companies, improves the probability of starting, retaining and attracting new business.
So who ranks best for 2014?
Dropping out of the top 10 in 2014 was Texas, which moved from 9th to 11th, with Indiana moving into 10th best from 11th.
The 10 states with the least desirable State Business Tax Climate Index included:
Want to know more about comparison between states or other findings of the study? Or where your state ranks?
To download the complete 56 page report click http://taxfoundation.org/sites/taxfoundation.org/files/docs/2014%20State%20Business%20Tax%20Climate%20Index.pdf
If you need comparative tax information, the Tax Foundation offers a wide range of studies, reports and data at http://taxfoundation.org/
While not all-defining on business locations, taxes do enter the decision process on where to operate.