Washington stays at No. 11 on Tax Foundations 2015 State Business Tax Climate Index

The Tax Foundation today releases its 2015 State Business Tax Climate Index, again finding Washington among the best, just out of the top ten at No. 11.

TaxFoundation-2015-SBTCI

From the group’s press release for Washington.

The breakdown of Washington’s ranking this year is as follows (1st is best, 50th is worst):

* Washington’s overall State Business Tax Climate ranking: 11th
* Corporate tax structure: 28th
* Individual income tax structure: 6th
* Sales tax structure: 46th
* Property tax structure: 23rd
* Unemployment insurance tax structure: 19th

As we’ve written before, Washington’s high ranking on the Tax Foundation is largely because the state has no business or corporate income tax. (See this Policy Brief and this post on last year’s ranking.

Readers who click through to last year’s ranking (or who have good memories) will note that in 2014 we ranked No. 6, not No. 11 as reported. I asked Tax Foundation Vice President of Legal & State Projects Joseph Henchman what changed. He explained the methodological changes in an email.

Two methodology changes that we backcasted into prior years:

·         We changed our data source for unemployment insurance data, from the U.S. Department of Labor to the National Foundation for Unemployment Compensation & Workers Compensation. State labor departments lobbied us to make this change as they argued (correctly, as it turns out) that UWC’s data is more accurate than DOL.

·         States that say they follow federal tax treatment S-corps and LLCs (taxing the individual income to shareholders but not at the corporate level) but nevertheless impose a business tax on S-corps and LLCs no longer get treated as conforming to federal rules. This is the case for Washington’s B&O tax.

Here’s the top 10 and a short note on how they got there, from the executive summary.

The 10 best states in this year’s … Index are Wyoming, South Dakota, Nevada, Alaska, Florida, Montana, New Hampshire, Indiana, Utah, and Texas. Many of these states score particularly well because they go without one of the major taxes, but this does not mean that a state cannot rank in the top ten while still levying all the major taxes. Indiana and Utah, for example, have all the major tax types, but levy them with low rates on broad bases.

Let the debate begin. Or, rather, continue.