Projo Biz Blog

Rhode Island ranked 46th _ and fourth from the bottom - in a ranking of state business tax climates that was prepared and released this morning by the Tax Foundation, a nonpartisan, nonprofit organization based in Washington.

Wyoming has the best tax climate and New Jersey had the worst tax systems for "business friendliness," according to the index.
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The index, published yearly by the Tax Foundation since 2003, ranks states based on these taxes: corporate tax, individual income tax, sales tax, unemployment tax and property tax. The states are scored on these taxes, and the scores are weighted based on the relative importance or impact of the tax to a business.

"The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest competitive advantage," said Tax Foundation Staff Economist Joshua Barro, the study's author. "States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth."

The top ten states in the Index, from 1st to 10th, are Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, Texas, New Hampshire, Oregon, and Delaware.

The bottom ten states, from 41st to 50th, are Minnesota, Nebraska, Vermont, Iowa, Maryland, Rhode Island, Ohio, California, New York and New Jersey.

Barro urges states to constantly be on the lookout for ways to improve their business tax climates. If they stand still, they lose ground to states actively improving their climates.

"States do not enact tax changes (increases or cuts) in a vacuum," Barro explains. "Every tax law will in some way change a state's competitive position relative to its immediate neighbors, its geographic region, and even globally. Entrepreneurial states can take advantage of the tax increasing of their neighbors to lure businesses out of high-tax states."

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