Friday, September 25, 2009

The Importance of the Business Tax Climate

As we're struggling to emerge from this recession, there was a bit of a slap in the face to New Jersey this week. An organization called the Tax Foundation released its annual list ranking the states according to the State Business Tax Climate Index. Bringing up the rear, ranked 50th out of 50, was the Garden State.

The ranking is based on corporate income, individual income, sales, property and unemployment insurance taxes. New Jersey was downgraded because of the recent enactment of a millionaires' tax, among other things, although it had already ranked in last place last year as well.

At the same time, there's something a bit off about this list. Ranking just above New Jersey, in 49th place, is New York, and California is in 48th place. But at the top of the list is a state that's never been known for its thriving business community, South Dakota, and it's followed by Wyoming and Alaska.

What we really seem to be seeing on this list is that states with solid environments for business growth, like New York and California and, yes, New Jersey, can afford to tax those businesses a little more, while states in desperate need of business growth have to use tax policy to attract that growth.

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