As I prepare to head to Sacramento for a conference, the Bronze Golden State found that it held fast this past year as the third worst business tax climate in the United States as ranked by the Tax Foundation. That said, you do have to travel to the East Coast to find the two worst climates for businesses: New Jersey and New York.
Here are the top ten business climates (numbers in parentheses are the 2008 rankings):
1. South Dakota (2)
2. Wyoming (1)
3. Alaska (4)
4. Nevada (3)
5. Florida (5)
6. Montana (6)
7. New Hampshire (8)
8. Delaware (10)
9. Washington (12)
10. Utah (11)
Here are the bottom ten:
41. Vermont (43)
42. Wisconsin (38)
43. Minnesota (41)
44. Rhode Island (46)
45. Maryland (45)
46. Iowa (44)
47. Ohio (47)
48. California (48)
49. New York (49)
50. New Jersey (50)
California’s tax system isn’t uniformly bad according to the Tax Foundation. They rank California as having the 13th best property tax system. Of course, that’s due to Proposition 13, which liberals in California still decry. We also have the 14th best Unemployment Tax system. However, that’s almost certain to fall in future years; California’s unemployment insurance fund is broke and has been borrowing from the federal government. Unemployment taxes will either rise or benefits will be cut. There’s no political will in the legislature for the latter so the former is a given sometime in the future.
California’s corporate tax system is ranked as the 34th best in the country—below average, but not horrible. It’s the last two categories where California hurts businesses: sales tax (ranking 48th) and individual income taxes (ranking 48th). California did improve in corporate tax structure from 45 in 2008; this was due to the changes made in corporate taxation as part of the February 2009 budget deal—changes already being decried by liberals in Sacramento.
One excerpt from the full report is particularly telling for California:
States do not enact tax changes (increase or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region, and even globally. Ultimately it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.