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Passing the tax test
Virginia Business
December 2004
Virginia
treats its business community better than most states,
but it still has room for improvement, according to
the Washington, D.C.-based Tax Foundation. The Old Dominion
moved up a rung, from 13th to 12th, in the organization’s
annual ranking of business-friendly states. The study
bases its results on the major features of a state tax
system: corporate income tax, individual income tax,
sales or gross receipts tax, unemployment insurance
tax and the state’s fiscal balance.
Topping the list are South Dakota, Florida, Alaska and
Texas. The worst states, cited for tax codes with too
much complexity and above-average rates, are Hawaii,
New York, Minnesota, West Virginia and Rhode Island.
Virginia fared well in its corporate income tax and
sales tax. The state was praised for having a well-designed,
single-rate corporate tax structure, for avoiding tax
pyramiding within the sales tax structure and for maintaining
a low excise tax rate. But Virginia lost ground for
its unemployment taxes, finishing 26th in that category.
The rankings aren’t just about bragging rights.
Study authors concluded that corporations take notice
of business-friendly tax structures and are more likely
to put operations in states with favorable tax environments
than they are to move to overseas locations. “States
do not enact tax changes in a vacuum,” said co-author
Scott Hodge, president of the Tax Foundation. “Every
tax change will affect a state’s competitive position
relative to its neighbors, as well as globally.”
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