In spite of President Obama’s dubious claim that “… capitalism doesn’t work …”, it seems his economic ideas don’t work either. At least not at the state level.
According to the Tax Foundation’s 2010 State Business Tax Climate Index (Seventh Edition), Iowa ranks 46th among the 50 states for business-friendly tax policies. And, as Mr. Obama and Iowa Democrats are beginning to realize, unfriendly business policy is very bad for job growth.
South Dakota has the most “business-friendly” tax system and New Jersey has the least, according to the Tax Foundation’s 2010 State Business Tax Climate Index. The index measures the competitiveness of the 50 states’ tax systems and ranks them accordingly based on the taxes that matter most to businesses and business investment: corporate income, individual income, sales, property, and unemployment insurance taxes.
The states are scored on these taxes, and the scores are weighted based on the relative importance or impact of the tax to a business. Keeping a state competitive in today’s global marketplace can be difficult, but there is one factor lawmakers have direct control over: the quality of state tax systems. The index measures how well a state’s tax system encourages investment by maintaining a broad tax base and low rates.
The top 10 states in the 2010 index from 1st to 10th are …
- South Dakota
- Wyoming
- Alaska
- Nevada
- Florida
- Montana
- New Hampshire
- Delaware
- Washington, and
- Utah.
The bottom 10 states from 41st to 50th are …
- Vermont
- Wisconsin
- Minnesota
- Rhode Island
- Maryland
- Iowa
- Ohio
- California
- New York, and
- New Jersey.
Oklahoma saw the biggest drop in ranking this year-from 19th in 2009 to 31st in 2010. Not because of legislative changes, but because the Tax Foundation was able to obtain much more detailed nationwide data on local-option sales taxes, which are much higher in Oklahoma than in most states (above 4% in several municipalities).
Kentucky’s ranking improved the most-up 14 spots from 34th in 2009 to 20th in 2010. Many economically damaging changes were enacted in other states that previously ranked better than Kentucky-especially in the personal income tax-so other states’ rankings fell while Kentucky remained stable.
Tax Foundation Background Paper No. 59, “2010 State Business Tax Climate Index,” is available online at www.taxfoundation.org/research/show/22658.html.
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