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New “tax climate” rankings have been released giving a state-by-state view of the overall impact of all types of taxes on your pocketbook. The range of the tax impact in the Midwest goes from average to not-so-good.
The Tax Foundation’s 2013 State Business Tax Climate Index compiles information for lawmakers and economists who use the results to compare their state’s tax rates to other states as they debate the effects of tax rate increases.
The numbers are also used to see how attractive one state may be compared to another as competition to lure job-producing businesses heats up.
The new report shows overall (with #1 being the best ranking and #50 the worst) Missouri ranks #16, Kansas #26, Nebraska #31 and Iowa #42.
The rankings include the combined impact of individual income taxes, sales taxes, unemployment insurance taxes, property taxes and corporate taxes. Some states benefit by not charging one or more of the major taxes.
The top ten states with the lowest overall tax impact are: #1 Wyoming, #2 South Dakota, #3 Nevada, #4 Alaska, #5 Florida, #6 Washington, #7 New Hampshire, #8 Montana, #9 Texas, and #10 Utah.
The states with the worst overall tax impact are: #46 Rhode Island, #47 Vermont, #48 California, #49 New Jersey and #50 New York.
The numbers show the state with the most improved ranking is Maine, moving from #37 to #30, which benefited in part from a repeal of their alternative minimum tax. Michigan jumped from #18 to #12 following the implementation of a flat 6% corporate income tax replacing a complicated system that was accused of offering unfair tax preferences.
As debates rage over how to increase jobs and turn around sagging economies, the Tax Foundation warns attention needs to be paid to what’s happening across state borders. The report says, “They need to be more concerned with companies moving from Detroit, Michigan, to Dayton, Ohio, rather than from Detroit to New Delhi.”
To check out the overall tax ranking and an explanation of what you are paying in your state, click on these links for an individual summation:
Note from McRuer CPAs: Remember that the Tax Foundation’s index is published annually and is based on the previous year’s tax rates, regulations, revenues and more. The state of Kansas passed sweeping tax reform last May (2012) and the results of those changes will not be reflected on the state rankings until the 2014 Index is released. Experts predict it could make a dramatic difference changing the state’s ranking considerably. It will depend upon whether the reforms prove to be helpful or hurtful for its overall economy.