By Karen Axelton
How does your state rank in terms of business taxes? If you’re still smarting from paying your most recent state tax bill, you might want to take a look at the Small Business & Entrepreneurship (SBE) Council’s recently released Business Tax Index 2011. The report ranks the states from best to worst in terms of taxes on small businesses.
“Higher taxes have an impact on a state’s competitiveness,” said Raymond J. Keating, chief economist for SBE Council and author of the report. “There is a reason why low-tax states are better able to attract investment, and ‘Business Tax Index 2011‘ helps to shed light on the tax burdens that are affecting the decisions of individuals and businesses.”
The Index takes into account 18 different tax measures, including income, capital gains, property, death/inheritance, unemployment, and various consumption-based taxes such as state gas and diesel taxes, and combines those into one tax score.
According to the Index, the 15 best tax systems are: 1) South Dakota, 2) Texas, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Alaska, 9) Ohio, 10) Colorado, 11) South Carolina, 12) Mississippi, 13) Oklahoma, 14) Virginia and 15) Missouri.
The 15 worst state tax systems are: 37) Illinois, 38) North Carolina, 39) Nebraska, 40) Connecticut, 41) Oregon, 42) Rhode Island, 43) Hawaii, 44) Vermont, 45) California, 46) Maine, 47) Iowa, 48) New York, 49) New Jersey, 50) Minnesota, and 51) District of Columbia.
Of course, it’s pretty clear from these results that you may not want to base your decision to move solely on tax burdens. The tradeoff of moving to a state with lower taxes can be less support, a smaller customer base and difficulty accessing skilled workers. At the same time, several states that have good business climates for other reasons rank among the top 15, making them even more inviting.
See full results and an interactive map at the SBE Council website.