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The Tax Foundation released its yearly State Business Tax Climate Index. This index measures the impact of taxes on business activities by looking at how much the citizen is taxed and also the amount of compliance. Five taxes are considered: 1) individual; 2) corporate; 3) sales; 4) property; 5) unemployment insurance.

Wyoming lead the states in growth, with a GDP gain of 7.6%. At the bottom, predictably, are New York (49th) and New Jersey (50th). New Jersey saw GDP growth of only 1.1% last year, while New York’s was only 0.7%. According to the report, New Jersey secured last place because “suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country.” Contrast that with Wyoming, which has no corporate or individual income tax.

The most surprising finding from the report was that North Carolina, which previously ranked 44th, was now ranked 16th. According to the Tax Foundation, “North Carolina’s largest improvement was in the individual income tax component section, where legislation restructured the previously multi-bracketed system” with a top rate of 7.75% to a single-bracket system with a rate of 5.8% “and a generous standard deduction of $7,500.”

The WSJ also noted that, “North Carolina is also reducing its corporate income tax rate—to 6% this year from 6.9% last year. The rate could drop as low as 3% by 2017 if the state achieves certain revenue targets for its general fund. North Carolina also received credit in this year’s ranking for a simplified sales tax system.”

The ten best states this year are:

1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Montana
7. New Hampshire
8. Indiana
9. Utah
10. Texas

8 of these top ten do not have of the five major taxes noted above. Indiana and Utah do have five, “but levy them with low rates on broad bases.”

The ten worst states are:

41. Iowa
42. Connecticut
43. Wisconsin
44. Ohio
45. Rhode Island
46. Vermont
47. Minnesota
48. California
49. New York
50. New Jersey

They earned this spot because all of the states “suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.”

In sum, “Taxes matter to business. 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. 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). Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.”