Absence of Income Tax is Key to State Competitiveness

The Tax Foundation has released its annual State Business Tax Climate Index and there are two things that jump off the page. First, the top five states (and seven of the top 10) have no state income tax. The flip side is that the worst-performing states all have income taxes, generally with steeply “progressive” rates. Rhode Island is in last place, though it will be interesting to see whether a quasi-flat tax adopted this year will improve the state’s future rankings. Tax-news.com reports:

The Tax Foundation’s 2008 State Business Tax Climate Index has found that Wyoming has the most business friendly tax regime in the United States, while the business powerhouses of California and New York continue to fare particularly badly in terms of state tax competitiveness. …According to the index, the top ten states with the best business tax climate in 2008 are: Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, New Hampshire, Texas, Delaware and Oregon. Propping up the table was Rhode Island in 50th place. California, New York and New Jersey occupy 47th, 48th and 49th place on the index respectively. The remaining states in the bottom ten include (descending): Maine, Minnesota, Nebraska, Vermont, Iowa and Ohio. “There’s no question that states are competing with one another for companies, jobs, and people,” announced study co-author Curtis Dubay. “Taxes matter to businesses, and the states with better business tax climates will reap the rewards.”