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The Best and Worst States for Small-Business Taxes
High corporate income taxes or sales taxes can be a huge challenge for small businesses, depending on where they are located. So where does your state stack up?
Posted 2/ 19 11 at 11:00 AM | News, Money, Sales, Taxes & Accounting, Legal Issues
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Location, location, location: It's not only important when it comes to where you live or where you set up shop -- it affects the taxes you pay on business profits, the sales taxes your customers pay and the property taxes you pay on your facilities (directly as a property owner or indirectly through rent).So how does your location compare with other states? Each year, the Tax Foundation, a Washington, D.C.-based nonpartisan research group, conducts a survey to rank the states, factoring in corporate tax, personal income tax, sales tax, property tax and unemployment insurance tax.
Here are the results of the 2011 Small Business Tax Climate Index.
Best States for Small-Business Taxes
What makes a "good" tax state? Not having one or more major taxes -- corporate income taxes, personal income taxes, sales tax -- is important for a favorable tax climate. Low property taxes and low unemployment taxes that employers pay on wages to their staffs are also factors.
The best states for small businesses from a tax perspective are:
1. South Dakota: No corporate or individual income tax
2. Alaska: No individual income tax or state sales tax (there are some local sales taxes)
3. Wyoming: No corporate or individual income tax
4. Nevada: No corporate or personal income tax
5. Florida: No personal income tax
Worst States for Small-Business Taxes
What makes a "bad" tax state? These are the states that have complex tax rules with high tax rates.
The worst states for small businesses:
1. New York: The third-worst personal income tax, the ninth-worst sales tax and the very worst property tax
2. California: The second-worst sales tax and the third-worst personal income tax
3. New Jersey: The third-worst property tax and fifth-worst personal income tax
4. Connecticut: The second-worst property tax and, with the enactment of its "millionaire's tax," the third-worst personal income tax
5. Ohio: The fifth-worst property tax and the sixth-worst income tax
New Jersey had been at the bottom of the list for four consecutive years, but eliminating the top two personal income tax brackets so that the top rate fell from 10.75 percent to 8.97 percent moved it up in the rankings.
Barbara Weltman is an attorney, author of several business books including J.K. Lasser's Small Business Taxes and trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day and monthly e-newsletter Big Ideas for Small Business, both available at www.barbaraweltman.com, and host of Build Your Business radio. Follow her on Twitter at Twitter.com/BarbaraWeltman.
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Comments (Page 2 of 3)
If your living on another planet, then you'll not get this. Our States are facing Bankruptcy, over the years one Aminatration would make deals with various unions, knowning that the deals were unattainable. But why worry, leave it to the next adminatration. Look at the five worst, all are in the hole, all have pensions and health care issues with the unions they made deals with. So what did the previous admintrations do, tax everybody else. Washington and the States have know for a long time that Entitilements, which make up over 50% of their budgets needed to be fixed. But since their inception, they were never addressed again. no one is trying to throw Grandma under a bus, but we are sure going to throw our children and grand children under a bus(DEBT). Wahington should do their job and let the States do their's, but not this Adminstration.
MMMm it takes one day in Texas to set up a small business...no state income taxes..reasonable business taxes...gosh and for some inexplictable reason we didn't make the top five..
facinating
Just because a state doesn't have an income or corporate tax doesn't make it small business friendly. Alaska (ranking 2 here) has a multi agency buearcracy, especially in Anchorage which takes code requirements and standards to the max; and there are fees on top of fees. Alaska is definately not a friendly state, especially if you are in the retail or restaurant business. Want a liquor licence for your restaurant, you've got to buy an existing one at a premium price. Alaska could go a long ways towards being more small business friendly.
I setup businesses on the East Coast and on the West Coast. I was promptly severely reprimanded for failing to jump thru the bureaucratic flaming hoops (Read: paying permit to apply for authorization to apply for license to do bidniss) with threats of criminal prosecution unless I paid forthright a gaggle of arbitrary fines. I setup several businesses in the Chicago area. No trouble. Well, each time, a guy showed up one day and I got rid of him with an envelope. Never had any more visits.
This map already needs updating. I know NC and SC are working toward change for business.
Karen
Neoclassical economics notes that taxes reduce production. This article idenifies the states without state income tax and the five states with the heftiest state income taxes, as related to business revenues earned. Since taxes of any sort inhibit production, they can come from other sources than the state (something not mentioned in this article). Denver, Colorado taxes the business equipment annually at 35% of its basis. Cities south of Chicago levied such onerous taxes that the people living there, who owned homes, actually abandoned their homes, and moved to other places. Reasonable taxes result from reasonable legislators. Their communities prosper, and their governments receive the taxes that they levy, because the local govenments provide an environment for growth.
This article is not very accurate. Here in NC, where they lured so many Northern retirees to come in past decade (like Colorado and other places did), now sees massive unemployment, jobs lost, education jobs cut, and higher taxes being implemented everywhere. In a years' time, State income tax went up 1% across the board, alcoholic products taxed additional 5%, cigarettes 50cent per pack tax added all on top the State tax charegd on EVERYHTHING you purchase here... You cannot even go out of business here without paying a tax/fee to the State of NC! Then many Cities implemented additional taxes like Asheville, NC having a "rain tax", whereas all your hard surfaces you have that do not allow rain to directly hit and soak into ground are assessed a per suare foot charge for that asphalt/concrete area... It goes on and on.
I am a small business owner here and have owned businesses in other states over 30 years; but as another posted stated, I can no longer afford to hire the right people and am down to a One Man Shop with lists of manpower available as I need it on temp basis: because 1) Either they do not have the fulle skills I seek or 2) they have no hard work ethic. On top of all that and what gauges my business, is the fact, people/customers have less to live on today as in past years and are struggling so this reflects on what my business can charge for our services to still stay legal and in business today.
It was never this way in my lifetime before, and what is happening today, will make the stagflation on the 1970's look like child's play.
The worst to happen in NC like many other staes, is we lost our manufacturing blue collar job base which was employer of the majority of US citizens for generations. They made decent incomes, had company provided insurances and pensions, and all of that is gone today overseas. The corp heads however, enjoy all the profits and are even wealthier. And in the past, it used to be employers compensated employees and valued them for their contributions, but today's younger generation of executives want all the profits and little incomes going to those who make & support the business operations. It is the same with the US eductaion system like here in NC where Administrtaors enjoy high 6 figure incomes, yet teachers averaging maybe $15.00/hour.
What we see left, looking at my own retired customers for instance, is a trickling of what was from the past US job culture being redistributed through our society, as today, people have to realize they will have to live on less and make more of the little things and have less credit available as well while your prices increase on all products you purchase. .
Steve, your a man after my own heart. The only one I have read so far that has balls to state the facts. Everything you said is true, there is a lot of dumb people out there that can't or won't open their eyes. People get dummer every day. God Help Us.
I get a little sick about people bitching about TAXES. Someone here even tried to blame President Obama. That shows too many Americans are misinformed about what causes higher Federal, State, and local taxes including sales taxes and vehicle registration fees.
How about an idiotic president. GW Bush, who with his cronies in Congress had consistently allowed the very richest people in America pay lower taxes now while shifting the TAX burden on the Middle Class.
I live in California and yes, we have higher taxes. But why? How about a illegal War in Iraq that was totally unjustified that is costing us billions of dollars and our young people's lives. Terrorism there is even worse since that dipstick overthrew Sadam Hussein. Yes, he was a despot, but he kept those islamic extremist in control.
Let's not forget it was Bush's adminstration that gutted our NSF domestic security functions, that led to the 9-11 tragedy. Then this Facist sets up "Homeland Security" with promises of Federal support. Not one check to California was sent for YEARS complying with this ludicrous Federal Agency. Now we have to fend for ourselves, but we still have jobs here.........go live in North Dakota......you're welcome to it. God awful weather, nothing to do, might as well stick your head in dem Black Hills.
We pay higher taxes because the rich and influential get away with murder, and probably always will until more thatn 50% of Americans get off their asses and VOTE. What a statement on our society that they put Republicans back into control of the House of Representatives. Ignorant citizens who actually believe the Iraqis had anything to do with 9-11.
You deserve exactly what you get. It's the ignorant Americans that have made this country a Capitalistic State, not the jerks in Washington. Take some responsibility, and stop pointing fingers.
I have 10 years before I can dream of moving out of NY. My current property tax on an alleged $350k home is 12K per year which leaps each year by 4-6% due to ridiculous pensions and salaries of union workers. In 10 years, I will have paid $176,000 to the local government. Something is seriously wrong with this picture.
I love all you democrat defenders. The smart people MOVED out of NY & NJ. I did, because I like keeping my money, that I earned. The government (state & federal) squander your tax money. You could take the current taxes and CUT THEM IN HALF, WHILE STILL KEEPING ALL THE SERVICES.
This article is ridiculous - "Best states for business taxes" South Dakota, Alaska, Wyoming are also the worst states for CUSTOMERS. Alaska, btw, gets far more money in spending from the federal government than it pays in taxes, so it's a governemnt supported basket-case for business.
Very thoughtful and edifying comments here. But was the last sentence of the article a little vague and confusing, or is it just me? "New Jersey had been at the bottom of the list for four consecutive years, but eliminating the top two personal income tax brackets so that the top rate fell from 10.75 percent to 8.97 percent moved it up in the rankings." Huh? Which list? (The 5 Worst? The opposite?Who, precisely, conducted said elimination of the tax brackets in question (and why?)---the state of NJ or the article's data-collectors in compiling that date? Maybe if it'd been presented in smaller font, with an asterik, just been some sort of footnote, I might think, well, obviously that little bit of info is meant for . . . I guess everyone else here on this message board. . . BUT NO! (ha! I'm laughing at myself right now, trust me on that) : Nooosirrreee: The above quoted sentence was, in fact, the articles' CONCLUDING PARAGRAPH! Which just bugs me. This is the first time I've just ranted silly-ly (altho' I have meant what I've said) on a comment board. I'm crackin' myself up.
I'm guessing Geodud and Odetta never ran so much as a lemonade stand.
Much like our commander in thief.
The main stream is getting tired of you Republican complainers - move to Somalia. No government. Let us know how you like it.
Just compared stats. Lower corporate tax rate states have the lowest unemployment. A notable exception is Nevada. Looks like high unemployment states must raise corporate taxes to pay for unemployment benefits. Somebody I know lost her job, and receiving unemployment, because the company moved from California to Tennessee because perhaps of this.
We have re-adjusted our LLP's and LLC's into Nevada.. After experiencing the load that is placed on us in New Mexico (Bill Richardson messed this state up) and Texas (heavy business assessment each year on gross rental income) we've started migrating all our efforts, employees and new business starts into Nevada.
I'm a small business owner and I gladly pay my taxes. Because when I do, it means that I'm keeping people working and making a profit. Since my government created the infrastructure which allowed me to build my business and my customers' build theirs, educated me and my workforce, plowed the snow, fixed the potholes, kept my air and ocean clean, built parks so that I could play & coach, protected my home and office, created courts so that I could sue the deadbeats that didn't pay me, and defend my country, I have absolutely no problem with paying my share of common expenses. Thank you fellow taxpayers for making my and my family's happy life possible. It is NOT all my money. Only 3rd Generation inheritance slackers like W talk like that, and it's spread to their ignorant moron friends.
This is really silly because the "best" states have more animals than people while the "worst" states have all the population, the customer traffic, the businesses, the decision makers, the best colleges and all the opportunities. What are you gonna tax in Wyoming? Moose?
The only problem is unfair taxation: the 5% that control 80%of the wealth of the nation, are not paying the 80% they should.