We’re No. 48! It doesn’t quite have a catchy ring. But it does sound better than we’re third worst.
Sadly, that’s where California ranks among states when it comes to tax climate. The Tax Foundation just released its annual State Business Tax Climate Index and California is No. 48, ahead of only New York and New Jersey. At least we did not move in the wrong direction. We had the same sad ranking a year ago.
But that is expected to change, as New York, ranked 49th, passed a sweeping overhaul of its corporate tax code that will phase in over the next several years. That will likely mean California will fall back a slot.
The nonpartisan group rated California as being last for individual income tax structure, 42nd for sales tax structure and 34th for corporate tax structure. We did relatively well, 14th, for property tax structure and unemployment insurance tax structure.
The Index measures how well structured each state’s code is by analyzing more than 100 tax variables. States are punished for overly complex, burdensome, and economically harmful tax codes but are rewarded for transparent and neutral tax codes that do not distort business decisions.
The 2014 ALEC-Laffer State Economic Outlook Rankings placed California No. 47, ahead of Illinois, Vermont and New York. That index is based on 15 state policy variables, including tax rates, tax burden, minimum wage and workers’ compensation costs.
Here’s where California performs poorly:
Top marginal personal income tax rate: 50th
Personal income tax progressivity: 50th
Recently legislated tax changes: 49th
State liability system survey: 47th
State minimum wage: 39th
Average worker’s compensation costs: 48th
Right-to-work state: 50th
All of the laws and policies have contributed to some poor performance in recent years, according to ALEC-Laffer. Its Economic Performance Rank is 43rd, based on state gross domestic product, domestic migration and non-farm payroll employment.
So is Texas the place to be? It does rank first in the Economic Performance Ranking, but only 13th in the Economic outlook ranking. Number one in that ranking goes to Utah, which ranks second in performance during the past ten years.