STATE—The tax climate of New Jersey ranked 49th this year out of all 50 states, according to a new report by the Tax Foundation, a non-partisan conservative think-tank based in Washington, D.C. The Garden State remains as the second worst climate in the 2014 State Business Tax Climate Index, although it is neck and neck with New York (50th).
“This year, New Jersey and New York are virtually tied for the worst business tax climate in the country,” said Tax Foundation economist Scott Drenkard. “New York has an opportunity to make beneficial reforms to its tax code this year with the creation of Governor Cuomo’s tax reform commission. In order to remain competitive with New York, New Jersey will have to vamp up their own tax reform efforts.”
Several states have moved in the rankings since last year, with Texas dropping out of the top ten for the first time, landing at #11, and Virginia and Kentucky both falling three places to #26 and #27, respectively. On the positive side, Arizona climbed five ranks to #22 and Kansas shot up six spots to #20. Several other states also saw smaller changes.
“The states that lost ground this year usually did so because they changed policy in a way that makes the tax code more complex, burdensome, or economically harmful,” said Drenkard. “By contrast, the states that improved did so because they are moving closer to a tax code that collects revenue without unnecessarily distorting business decisions. Their tax codes became more neutral.”
The State Business Tax Climate Index, now in its 10th edition, collects data on over a hundred tax provisions for each state and synthesizes them into a single, easy-to-use score. The states are then compared against each other, so that each state’s ranking is relative to actual policies in place in other states around the country. A state’s ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states.
The top ten states in 2014 are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), Washington (#6), Montana (#7), New Hampshire (#8), Utah (#9), and Indiana (#10).
The 10 lowest ranked states in 2014 are Maryland (#41), Connecticut (#42), Wisconsin (#43), North Carolina (#44), Vermont (#45), Rhode Island (#46), Minnesota (#47), California (#48), New Jersey (#49), and New York (#50).
“The goal of the State Business Tax Climate Index is to start a conversation with policymakers about how their states fare against the rest of the country,” said Drenkard. “With this report, we’re asking: ‘how well is your tax code structured? Are businesses in your state spending too much time complying with onerous tax provisions? Are you double taxing things you shouldn’t?’”
Tax Foundation Background Paper No. 68, “2014 State Business Tax Climate Index” by Scott Drenkard and Joseph Henchman is available online.
The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Communications Associate Richard Borean at 202-464-5120 or firstname.lastname@example.org
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