Utah 16th in business tax climate

Published: Friday, Oct. 13, 2006 8:40 p.m. MDT
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Utah ranks 16th nationally in having the best business tax climate, according to a report released this week by the Tax Foundation, a nonpartisan tax research group based in Washington, D.C.

Wyoming was rated as having the best business tax climate. Rhode Island ranked last.

The report said states with the best tax systems are the most competitive in attracting new businesses and most effective at generating economic and employment growth.

"Examples of companies choosing states due to favorable tax systems are plentiful," the report noted. "A recent example, from 2005, is Intel's decision to build a multibillion-dollar chipmaking facility in Arizona due to its favorable corporate income tax system. California struggles to retain businesses within its borders because Nevada provides a low-tax alternative."

The ideal tax system, the report said, is "simple, transparent, stable, neutral to business activity and pro-growth."

The rankings tracked 113 variables into five component indexes, each weighted differently, that measured a different sector of a state's business tax climate.

The five indexes included the corporate tax index, individual income tax index, sales tax index, unemployment tax index and property tax index. The total score for each state is calculated based on the scores on each of the five component indexes.

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Voices for Utah Children, a child advocacy group based in Salt Lake City, criticized the index, calling it "overly simple" and "fundamentally flawed."

"Its conclusion that low business taxes are the key to attracting and keeping desirable businesses is incorrect," a statement by the organization said. "State and local taxes are a small part of business costs, and therefore play a minor role in investment decisions."

The statement went on to state that businesses are more concerned about the proximity of their markets and suppliers, the cost of labor, utilities and transportation.

"The index asserts that Wyoming has the nation's best business tax climate, and that New York has the fourth worst," the statement said. "These claims may cause headshaking for anyone who has visited both Cheyenne and Manhattan. Low taxes are not the only — or even the primary — criteria for assessing the business climate of any particular place."


E-mail: danderton@desnews.com

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