Latest Tax Foundation index may offer insight to new governor.
Talk of reforms and promises of tax cuts have been common on the Virginia gubernatorial campaign trail, but what actions might be taken remain to be seen, pending the results of the Nov. 7 election. In the meantime, the Tax Foundation’s 2018 State Business Tax Climate Index may provide some guidance.
This annual study is designed to show how well states structure their tax systems and provide a roadmap for improvement. Lawmakers should remember two rules when analyzing changes: Taxes matter to businesses, and states do not enact tax changes in a vacuum.
“Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy,” the index authors write. “Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value), or some combination of the above. Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.”
Additionally, the authors note, “Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its region, and even globally. Ultimately, it will affect the state’s national standing as a place to live and to do business. Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states.”
Here’s how Virginia fared in the 2018 index:
- Overall rank: 31st
- Corporate tax rank: 6th
- Individual income tax rank: 40th
- Sales tax rank: 10th
- Unemployment insurance tax rank: 41st
- Property tax rank: 31st
In 2017, Old Dominion ranked 32nd overall.