EAST LANSING, Mich., August 13, 2014—Anderson Economic Group’s 2014 Business Tax Burden Rankings assess the business tax burdens of all 50 states and the District of Columbia. The report shows Oregon, North Carolina, and Louisiana in the top three with Alaska, North Dakota, and New Mexico at the bottom with the highest burdens.
This report, now in its fifth installment, compares the total amount of state and local taxes businesses paid in each state in FY 2012 to business’ pre-tax operating margin in that year, a measure of the money businesses have available to pay their taxes. The report considers more than just the corporate income tax rate, addressing 11 different categories of taxes paid by business, of these, the property tax and sales tax where largest, followed by unemployment compensation.
Legislators and the public can overlook some of the most significant tax costs for business, including sales taxes on goods and services purchased by businesses, property taxes, and unemployment insurance. These all have a greater impact than corporate income taxes.
AEG’s rankings allow employers, policymakers, and investors to compare the tax burdens for employers in different states using a published and consistent methodology, and fully disclosed data sources.
AEG’s ranking is based on an objective measure of tax burden. “We estimate the actual amount of tax revenue collected from businesses across all types of business taxes. Some tax rankings simply order states based on the rate for a single tax or on the organization’s preferences for tax policy.” said Mr. Rosaen.
The states whose rankings improved the most from last year were California (21st to 14th) and New Jersey (38th to 31st). AEG’s home states of Michigan (28th lowest business tax burden) and Illinois (27th lowest) both ended up near the middle of the rankings this year. Michigan’s business tax burden decreased while Illinois’ increased.
Michigan has seen important changes to its business tax burden. In particular, Michigan’s rank improved from 32nd to 28th, and the business tax burden decreased by 0.5 percentage points. Executive editor and AEG CEO, Patrick Anderson, stated: “Replacement of the Michigan Business Tax with the new Corporate Income Tax has contributed to Michigan’s improved ranking. Our analysis reflects a significant drop in gross receipts taxes, in particular. Furthermore, Michigan’s business tax burden will continue to decrease with the recent passage of PPT reforms.”
Report co-author Jason Horwitz, a consultant based in AEG’s Chicago office, stated: “Illinois’ business tax burden was near the national average, and little changed from last year. Illinois has a low general sales tax burden on businesses, but is among the ten states with the highest public utilities tax. Also, the cost of unemployment insurance in the state remains relatively high due to a relatively high unemployment rate. This has had an impact on the state’s ranking.”
About Anderson Economic Group
Past State Business Tax Burden Rankings reports can be found here. AEG has provided independent analysis of tax, business climate, and other policy issues for numerous US states, universities, large corporations, businesses, trade associations, labor unions, cities, and counties since 1996. A large number of reports, including past business tax burden studies, are available on the company’s web site: www.AndersonEconomicGroup.com. AEG has offices in East Lansing, Michigan and Chicago, Illinois.
CONTACT: Tyler Marie Theile-Anderson Economic Group, LLC