The Tax Foundation has released its annual State Business Tax Climate Index and, once again, West Virginia does pretty well, but still has room for improvement.
The Foundation says its index “enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.” The report is not based on how much money states collect, but rather “how well states structure their tax systems and provides a road map for improvement.”
The Foundation looked at corporate taxes, individual taxes, sales taxes, property taxes and unemployment insurance tax. West Virginia has an overall ranking of 19th out of the 50 states, and that’s not bad. Our state does not need to be the most favorable business tax environment, but it certainly does not want to be at the bottom.
For the record, Wyoming has the best overall tax ranking, while Alaska is 2nd. New Jersey is 50th and California is 49th.
West Virginia’s highest ranking—13th—is for corporate taxes. That’s attributable to the state’s gradual reduction of the rate from a high of 8.5 percent to the current level of 6.5 percent over a five year period (2011-2015). Back in 2013, the Tax Foundation called that decrease “a good example of responsible, pragmatic, tax policy” because the reduction was linked to the health of the state’s Rainy Day Fund.
Our state’s ranking by the Tax Foundation in the sales tax category is 17th. New Hampshire, which is one of five states with no sales tax, comes in first. Louisiana is at the bottom of the 50 states. State and local sales taxes together can run as high as nearly 12 percent.
West Virginia is ranked 18th in the property tax category. New Mexico has the top rating, while Connecticut is 50th. According to ATTOM Data, the average annual property tax bill in Connecticut in 2017 was $7,100.
The Mountain State ranked behind most other states in the remaining two categories—28th in individual taxes and 30th in unemployment insurance taxes.
The Tax Foundation reports that, overall, West Virginia’s tax ranking has held steady since 2016. A decade ago, the ranking was 36th. The Foundation says the rates are not strictly comparable because its methodology changes from time to time. However, the Foundation points out that West Virginia’s lowering of the corporate net income tax and elimination of the business franchise tax have contributed to the better rating.
West Virginia still has room for improvement. The personal property tax on inventory, machinery and equipment discourages capital investment and puts our state at a competitive disadvantage. However, it would take an amendment to the state Constitution to get rid of it.