RI has 5th Worst Business Tax Climate in the Country
Thursday, January 26, 2012
Rhode Island’s business tax climate is still among the worst in the country, according to a new report by the Tax Foundation.
The state ranked 46th overall –up one from last year – ahead of only Vermont, California, New York and New Jersey, respectively. The bottom ten also included Iowa (#41), Maryland (#42), Wisconsin (#43), North Carolina (#44) and Minnesota (#45), respectively.
The State Business Tax Climate Index accounts for dozens of state tax provisions, creating a score that measures each state against the tax climates of every other state. Each state's ranking is therefore relative to the actual tax policies in place around the country, not a measurement against a theoretical "perfect" system.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“Rhode Island has improved from 47th to 46th by implementing a modest individual income tax reform, but still has the worst unemployment tax system and fifth-worst property tax system,” the reported noted.
Fundamental Changes
Wyoming, Florida, and Texas ranked among the ten best states for taxes on business.
The Index enables business leaders, government policymakers, and taxpayers to gauge how their states' tax systems compare. While some similar studies focus on the total amount residents pay in taxes each year, the Index focuses on how the elements of a state tax system enhance or harm the competitiveness of a state's business environment.
The state ranked worst in the country in unemployment insurance tax and 46th in property taxes, but the report did make note of slight positive gains for Rhode Island.
“Rhode Island made fundamental changes to its individual income tax in 2011,” the report stated. “The state formerly had five tax brackets, with rates starting at 3.75 percent and topping out at 9.9 percent. This system also included an optional 6 percent flat tax with few tax preferences. The 2011 change replaced this system with a flatter, broad-based three-bracket system with a top rate of 5.99 percent. On net these changes improved the state’s score significantly, but because it is such an outlier, Rhode Island’s rank improved only one place, from 47th to 46th.”
Lawmakers Should Pay Attention
The 10 best states in this year's 2012 Index are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), New Hampshire (#6), Washington (#7), Montana (#8), Texas (#9), and Utah (#10). Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.
The annual report attempts to inform lawmakers in every state about the decisions they are making in regards to businesses and help compare their policies with neighboring states. Massachusetts ranked 24th overall and Connected was No. 40.
"Even in our global economy, a state's stiffest and most direct competition often comes from other states," said Tax Foundation economist Mark Robyn. "State lawmakers need to be aware of how their states' business climates match up to their immediate neighbors and to other states in their region."
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