Study: Northeast Tax Codes Unfriendly to Businesses

A new study pinpoints the Northeastern states as having some of the worst business tax systems in the country.

New York has earned the dubious distinction of having the most unfriendly business tax climate in the country. Rounding out the bottom five on the list were New Jersey, Rhode Island, Ohio and Vermont, according to the Tax Foundation's State Business Tax Climate Index.

The top five states, given points for neutral tax codes and low, flat tax rates, are Nevada, Florida, Alaska, South Dakota and Wyoming, which is the most friendly to business, partly because the state has no corporate income or individual income tax, CNNMoney.com reported.

Florida's high ranking did not surprise officials at Harris Corp., a maker of communications equipment based in Brevard County. "I would rank Florida among the top one-third of states, when considering corporate and sales tax," Chuck Greene, Harris' assistant treasurer and vice president of tax, told Florida Today. "Add to that no personal state income tax, which helps companies attract and retain talent, and I can see why Florida would be among the most business-friendly states in the nation."

By contrast, New York has the highest rate of individual income tax in the country, as well as one of the highest jobless rates, which translates into high unemployment-insurance taxes for businesses.

“States with the best tax systems will be most competitive in attracting new businesses and be the most effective at generating economic and employment growth. Although the market is now global, the Department of Labor reports that most mass job relocations are from one U.S. state to another rather than to an overseas location,” the study said.

The Tax Foundation study looked at five categories: a state's principal business tax; the personal income tax; the sales or gross-receipts tax; the unemployment-insurance tax; and the state's system for taxing assets, primarily property tax. A total of 123 variables were considered in each state. Read the entire study at http://www.taxfoundation.org/research/topic/90.html

Some observers have said that while the Tax Foundation appears to be calling for neutral taxes, the Washington, D.C.-based nonprofit research group is actually advocating smaller government and lower taxes.

Peter Fisher, a professor of urban and regional planning at the University of Iowa, has analyzed the foundation's annual study. He told Florida Today: "The Tax Foundation argument makes it clear what it really thinks is important: low taxes, not neutral taxes.” He also criticized the study for failing to factor in local taxes.

The Tax Foundation wrote that critics like Fisher, “believe taxes are unimportant to businesses and therefore dismiss the studies as merely being designed to push low taxes.”

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