The West is Best for Business

October 15, 2013 — Leave a comment

For the third year in a row, Wyoming has fostered the nation’s best business climate, thanks to low rates on corporate and personal income taxes made possible by a booming oil industry, according to a new report from the Tax Foundation.

In fact, six of the top 10 states with the best business climate are western states, bolstered at least in part by new revenues from energy production that allows them to reduce other types of taxes. In many cases, the top-ranked states omit at least one major stream of revenue altogether, such as an income tax or a sales tax.

“If you can go without one of the major tax categories, not only do you have one less tool to distort the economy, but you’re also getting rid of a ton of overhead costs,” said Scott Drenkard, a Tax Foundation economist who co-authored the study. “You’re also able to get rid of the dead weight cost on the private side, where people are trying to comply with those taxes.”

Image Courtesy of: The Tax Foundation

Image Courtesy of: The Tax Foundation

Alaska, Florida, Nevada, South Dakota, Washington and Wyoming, all states in the Tax Foundation’s top 10, have no personal income tax. New Hampshire and Alaska have no sales tax.

Utah and Indiana, which place ninth and tenth in this year’s rankings, tax across all major revenue streams, but their rates are low across the board. Indiana, where the legislature cut taxes under former Gov. Mitch Daniels (R), displaced Texas in the top 10.

Texas Gov. Rick Perry (R) has cited the Tax Foundation rankings on trips to Democratic-run states like Illinois and Maryland, on which he tries to recruit businesses to move to the Lone Star State. Texas dropped a spot in the rankings, Drenkard said, because of the Texas margin tax, a tax on gross receipts. Michigan, Kentucky and New Jersey have eliminated gross receipts taxes in recent years, and some Texas legislators want to follow suit.

Northeastern states dominate the bottom 10, thanks to higher taxes on corporations and complicated tax codes. New York came in last place, while Rhode Island, Vermont, Connecticut, New Jersey and Maryland all fell in the bottom 10. California, Wisconsin, North Carolina and Minnesota all have tax rates high enough to qualify for the bottom 10.

Expect the Republican Governors Association to celebrate the rankings: Seven of the top 10 states are run by Republican governors, while seven of the bottom 10 states are run by Democrats.

The rankings won’t stay static next year. Drenkard said a package of tax reforms signed by Gov. Pat McCrory (R) earlier this year will move North Carolina out of the bottom 10; had those tax rules been in effect by the July 1 beginning of the fiscal year, North Carolina would have qualified for 17th place on the list.

See: North Carolina’s Tax Reform: A Model for the Nation?

Related articles

JDKatz: Attorney's At Law

JDKatz, P.C. is a full-service law firm focused on tax lawbusiness and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit

No Comments

Be the first to start the conversation!

Add your $0.02

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s