North Dakota is No. 28 in the nation. That’s the overall ranking the nonpartisan Tax Foundation gave the state on its 2014 State Business Tax Climate Index, released on October 9.
The Index gives each state an overall grade based on corporate income tax rank (North Dakota 22nd), Individual income tax rank (North Dakota 38th), sales tax rank (North Dakota 21), unemployment insurance rank (North Dakota 19) and property tax rank (North Dakota 2nd).
Key Points From the Index
- The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.
- It is important to remember that even in our global economy, states’ stiffest and most direct competition often comes from other states. The Department of Labor reports that most mass job relocations are from one U.S. state to another, rather than to a foreign location.
- State lawmakers are right to be concerned about how their states rank in the global competition for jobs and capital, but they need to be more concerned with companies moving from Detroit, MI, to Dayton, OH, rather than from Detroit to New Delhi. This means that state lawmakers must be aware of how their states’ business climates match up to their immediate neighbors and to other states within their regions.
- Tax competition is an unpleasant reality for state revenue and budget officials, but it is an effective restraint on state and local taxes.
- State lawmakers are always mindful of … business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform … Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business tax climate.
- The more riddled a tax system is with politically motivated preferences, the less likely it is that business decisions will be made in response to market forces.
- A far more effective approach is to systematically improve the business tax climate for the long term so as to improve the state’s competitiveness.
Click the graphic above to read the entire 2014 State Business Tax Climate Index from the Tax Foundation.