Tax comparison: Best states for business

The Tax Foundation has released its 2008 State Business Tax Climate Index. The Index ranks how "business friendly" the 50 state tax systems are, providing a roadmap for state lawmakers concerned with keeping their states tax competitive.

Keeping a state competitive in today's global market 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.

"There's no question that states are competing with one another for companies, jobs, and people," said study co-author Curtis Dubay. "Taxes matter to businesses, and the states with better business tax climates will reap the rewards."

Dubay added, "States need to constantly be on the lookout for ways to improve their business tax climate. If they're standing still, they're losing ground to states actively improving their climates."

The Index ranks states based on the taxes that matter most to businesses and business investment: corporate tax, individual income tax, sales tax, unemployment tax, and property tax. 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.

This year's Index was formally unveiled at the State Policy Network's Annual Meeting, held in Portland, Maine, on Thursday, October 11 by study co-author Chris Atkins.

The Index has been published yearly by the Tax Foundation since 2003. The full report includes historical data showing how the states have changed their rankings over time.

Rankings - The Top and Bottom 10 States in 2008


Top 10 Bottom 10
1. Wyoming 41. Maine
2. South Dakota 42. Minnesota
3. Nevada 43. Nebraska
4. Alaska 44. Vermont
5. Florida 45. Iowa
6. Montana 46. Ohio
7. New Hampshire 47. California
8. Texas 48. New York
9. Delaware 49. New Jersey
10. Oregon 50. Rhode Island

The full report, Tax Foundation Background Paper No. 57, and the full 50-state rankings, are available online at The Tax Foundation Web site.

The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.

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