Tax Foundation Releases 2007 State Business Tax Climate Index

October 11, 2006

The Tax Foundation released the 2007 edition of the State Business Tax Climate Index (SBTCI) today. The Index is designed to be a guide to businesses, taxpayers, lawmakers and media to determine where their state’s business tax climate ranks in comparison to other states.

The 2007 SBTCI is the fourth edition of the study and focuses on the dangers of tax incentives many states use as an economic development tool. Tax incentives- whether in the form of targeted tax incentives to specific companies, or special credits or exemptions- are bad tax policy and an ineffective form of economic development.

The SBTCI provides a roadmap for states to improve their business tax climate so the implementation of tax incentives will be unnecessary. States should be eager to improve their competitiveness now as many states are currently experiencing a windfall in tax revenues. It is often argued that a state can improve its business climate by increasing expenditures on education, roads and a host of other factors. However, those improvements- while they might possibly improve a state’s business climate- will take years to fully take effect.

Lawmakers can go to their respective state houses tomorrow, improve the competitiveness of their state’s business tax climate and instantly help businesses in their state and possibly attract new companies. While global competition remains a concern for all states, most business relocations occur between states. So lawmakers need to be keenly aware of where their state’s competitiveness ranks.

The top ten states in the 2007 SBTCI are as follows:

1. Wyoming 2. South Dakota 3. Alaska 4. Nevada 5. Florida 6. Texas 7. New Hampshire 8. Montana 9. Delaware 10. Oregon

The bottom ten states are:

50. Rhode Island 49. Ohio 48. New Jersey 47. New York 46. Vermont 45. California 44. Nebraska 43. Iowa 42. Maine 41. Minnesota

The full report can be found here.

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