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Study Looks at Taxes Remitted By Business

1 min readBy: Joseph Bishop-Henchman

Anderson Economic Group has released its third annual report ranking the states on business tax burdens. The report looks at 2006 data on taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es where the legal incidence falls on business. Economic incidence should be kept in mind: all business taxes are paid by individuals (whether they be consumers, shareholders, or employees). But looking at legal incidence, as this study does, shows how much states cloud the true tax burden through indirect taxAn indirect tax is imposed on one person or group, like manufacturers, then shifted to a different payer, usually the consumer. Unlike direct taxes, indirect taxes are levied on goods and services, not individual payers, and collected by the retailer or manufacturer. Sales and Value-Added Taxes (VATs) are two examples of indirect taxes. es like business taxes.

Here are the top 10 and bottom 10 rankings the study came up with:

States with Lowest and Highest Incidence of Taxation on Business (note: FY 2006 data)

Lowest Ten States

Highest Ten States

%

Rank

%

Rank

North Carolina

10.88%

1

North Dakota

20.32%

42

Delaware

11.03%

2

West Virginia

20.48%

43

Tennessee

12.01%

3

Florida

20.67%

44

Ohio

12.01%

4

District of Columbia

23.21%

45

Missouri

12.10%

5

New Hampshire

23.44%

46

Louisiana

12.22%

6

Hawaii

23.82%

47

Alabama

12.57%

7

Alaska

25.72%

48

Minnesota

12.58%

8

Vermont

26.45%

49

South Dakota

12.60%

9

Maine

27.40%

50

Connecticut

12.63%

10

Montana

30.61%

51


U.S. State Average


16.69%

At their release conference call this morning, the authors graciously complimented our State Business Tax Climate Index, which ranks the states on how their tax structure relates to principles of sound tax policy. The two studies look at different aspects of a similar issue.

Another useful study is put out by the Council on State Taxation (COST), which estimates business tax burdens for the current year while also including sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. es paid on manufacturing inputs (which is not included in the AEG study).

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