Want to start a new business or move your current operation? If taxes are your company’s primary concern, then you best cowboy up.
Yep, pardners, Wyoming, also known as the Cowboy State, has the best business tax climate.
That’s the word from the Tax Foundation. The Washington, D.C.-based tax research organization each year examines how state tax systems help or harm business competitiveness. According to the group’s 2014 State Business Tax Climate Index, Wyoming is now the best place for business when it comes to taxes.
Rounding out the 10 best states in which to run a business are South Dakota, Nevada, Alaska, Florida, Washington, Montana, New Hampshire, Utah and Indiana, in that order.
“It is important to remember that even in our global economy, states’ stiffest and most direct competition often comes from other states,” write study authors Scott Drenkard and Joseph Henchman. “The Department of Labor reports that most mass job relocations are from one U.S. state to another, rather than to a foreign location. … State lawmakers are right to be concerned about how their states rank in the global competition for jobs and capital, but they need to be more concerned with companies moving from Detroit, Michigan, to Dayton, Ohio, rather than from Detroit to New Delhi.”
And lower business taxes are a component that companies include in their decision to move from one state to another.
Problematic special tax deals
That said, the Tax Foundation report cautions states against making special tax deals for companies.
Such tax incentives and subsidies dangled as carrots for one or two companies, says the report, can be a dangerous proposition. The Tax Foundation cites North Carolina’s $240 million in incentives, primarily state and local tax credits, offered to Texas-based Dell Computers to get the technology company to open an operation in the Tar Heel State. Dell shuttered the plant in 2009 after only four years of operation.
Instead of special tax breaks for individual companies, the Tax Foundation argues that states need to focus on broad-based tax reform that is attractive to companies.
And which states need to do the most tax reform work, according to this latest business tax climate analysis?
According to the Tax Foundation, the 10 states found to have the least attractive business tax climates, from 41st place to 50th, are Maryland, Connecticut, Wisconsin, North Carolina, Vermont, Rhode Island, Minnesota, California, New Jersey and New York.
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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and a co-author of the e-book “Future Millionaires’ Guidebook.”