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If You Build It….We’ll Make it Worth Your While

Date: 11/08/2005 | Category: Business | Author: Diana Heeb Bivona

Business means big bucks for any state that can lure a company to their borders. With the arrival of a new business, it typically signals new jobs and tax revenues for that state. Therefore, the incentive for states to offer elaborate tax refund packages is great. However, as many critics of such tax incentives will agree, this is only a short-term fix, and can often backfire.

Case and point is Florida. In 1996, Florida lured a major credit card company with the promise of a $4 million tax refund package in exchange for the company building a new credit card call center in Tampa, Florida. Oh, sunny days! But wait…lawmakers were shocked to recently learn that the company intends to close the call center and lay off its 1100 workers.

The Tax Foundation argues that in order to attract businesses long-term, states need to focus on good tax fundamentals rather than short-term abatements and exemptions designed to lure high-profile companies from other states. In their State Business Tax Climate Index, they rate individual states in terms of their business tax climates.

To make the best business tax climate list, the state needs to be able to raise sufficient revenue without imposing one of the three major state taxes such as sales tax, personal income tax, and/or corporate income tax. For the honor of sitting on the worst business tax climate state list, the state needs to posses an inhospitable tax climate usually illustrated by complex multi-rate taxes or taxes that were well above average. So, who are the best and the worst states in terms of business tax climate?

The 10 Best – South Dakota, Florida, Alaska, Texas, New Hampshire, Nevada, Wyoming, Colorado, Washington, and Oregon

The 10 Worst – New York, Minnesota, West Virginia, Rhode Island, Vermont, Maine, Kentucky, Wisconsin and Arkansas

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