Good Morning Gentle Readers,
It may come as little surprise that New York is still the worst place in the country to do business but it surprises TWC that Californicate only ranks 40th in the latest Tax Foundation ranking of state business climates. I would have expected 49th.
Oh, and taking private property so Costco can build a new store or building a railroad siding for Boeing isn't what we mean by being friendly to business. I think that's called Corporate Welfare.
1. Taxes matter to business. Taxes affect business decisions, job creation and retention, plant location, competitiveness, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus a state with lower tax costs will be more attractive to business investment.
2. States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high tax states.
Clearly, there are many non-tax factors that affect a state’s business climate: its proximity to raw materials or transportation centers, its regulatory or legal structures, the quality of its education system and the skill of its workforce, not to mention the intangible perception of a state’s “quality of life.” Some of these factors are, of course, outside of the control of elected officials. Montana lawmakers cannot change the fact that Montana’s businesses have no immediate access to deepwater ports. Lawmakers do, however, have direct control over how friendly their tax system is to business.
Best place to do business? Wyoming. Hey Scott! You cold?
Whole study here in .PDF (3.9 mb dl)
News Release and comprehensive ranking schedule here.
The ten best states in the Tax Foundation’s 2006 State Business Tax Climate Index are as follows:
2. South Dakota
6. New Hampshire
The ten worst states in the SBTCI are as follows:
48. Rhode Island
49. New Jersey
50. New York