The non-partisan Tax Foundation has released its annual State Business Tax Climate Index and West Virginia continues the recent trend of a favorable ranking. The Mountain State has an overall ranking of 19, just ahead of Idaho and one spot behind Colorado.
West Virginia ranked ahead of all five surrounding states: Pennsylvania at 26, Virginia at 31, Kentucky at 33, Maryland at 43, and Ohio at 45. Wyoming had the best ranking, while New Jersey had the worst.
The Tax Foundation looks at the corporate tax rate, individual income tax rates, sales tax, unemployment insurance and property tax to determine the overall ranking. West Virginia’s best scores were sales tax with a rank of 15 and corporate with a ranking of 17.
West Virginia’s business tax ranking has been steadily improving over the years. Back in 2011 and 2012 the state ranked 23; however the gradual lowering of the state’s corporate net income tax from 8.5 percent to 6.5 percent and the elimination of the business franchise tax have helped improve the state’s standing.
Progressives dismiss the Tax Foundation as a subjective tool of business. They argue that taxes are less important in business decisions than other factors. Of course business decisions are based on myriad criteria including location, infrastructure, quality of the workforce, and regulations.
However, taxes are surely part of the equation. As the Tax Foundation reports, “Taxes matter to business. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value), or some combination of the above.”
All costs are important to business because each bill has to be paid before the business can claim a profit, and the tax man is usually first in line. And every dollar that has to be used paying a tax is a dollar that cannot be spent elsewhere.
With taxes it’s always about finding a sweet spot; what is a fair rate that produces revenue so the state can provide services people require without being so high that it discourages investment and growth? West Virginia has been steadily finding that balance and this latest Business Tax Climate Index demonstrates that.