West Virginia’s Business Tax Ranking Better Than Most

The Tax Foundation has released its annual State Business Tax Climate Index, and it shows West Virginia firmly in the middle of the pack of states.

The conservative-leaning think tank gives West Virginia an overall ranking of 22nd, with one being the best and 50 the worst.

The Foundation rated states on property taxes, unemployment insurance taxes, corporate and individual taxes and sales tax.

The report concludes that the best states in this year’s index are, from one to ten, Wyoming, South Dakota, Alaska, Florida, Montana, New Hampshire, Nevada, Utah, Indiana and North Carolina.

The states at or near the top often do without one or more of the major taxes.  For example, Nevada, South Dakota and Wyoming have no corporate or individual income taxes (although Nevada has a gross receipts tax).

The ten lowest-ranked states, from 41 to 50, are: Alabama, Louisiana, Vermont, Maryland, Arkansas, Minnesota, Connecticut, New York, California and New Jersey.

New Jersey consistently ranks at or near the bottom because, according to the Foundation, the state “is hampered by some of the highest property tax burdens in the country, (and) has the second highest-rate corporate and individual income taxes.”

In the individual categories, West Virginia’s best ranking is 10th for property taxes and 17th for corporate taxes.   The state’s ranking on corporate net income tax improved dramatically after the state phased down the rate from nine percent to the rate of 6.5 percent in 2014 and phased out the business franchise tax by 2015.

The state’s lowest scores are for individual taxes and unemployment insurance, with a ranking of 28th in both categories.  West Virginia’s individual tax rate ranges from 3 percent up to 6.5 percent.   Most new employers begin with an unemployment insurance rate of 2.7 percent.

A competitive tax structure is not the only determining factor for where a business locates, but it is important. Businesses need modern infrastructure and a skilled workforce but, as the Tax Foundation reports, “a simple, sensible tax system can positively impact business operations.”

Frequently, states get into bidding wars with each other trying to land a major business. That is often a losing proposition, especially for smaller states like West Virginia.  “States with more competitive tax systems score well in the Index because they are best suited to generate economic growth,” the report said.

With that in mind, West Virginia is better positioned than most of its neighboring states, at least when it comes to taxes. Maryland has the worst ranking at 44th, followed by Ohio at 39th, Pennsylvania at 27th, and Virginia at 26th.  Only Kentucky scores better than West Virginia at 19th.

West Virginia could still do better in the rankings.  The onerous personal property tax on machinery, equipment and inventory puts the state at a competitive disadvantage, for example.

However, the Index ranking of 22nd is positive, especially considering ten years ago the state’s overall ranking was 37th.

 

 





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