Competitiveness of state and local business taxes on new investment: Ranking states by tax burden on new investment

Source: Robert Cline, Andrew Phillips, Ernst & Young LLP., April 2011

As states recover from the recent recession, legislators and policy-makers are focusing attention on state policies designed to retain and expand employment and attract new investment. State and local business tax policy is an important element of this policy discussion, and legislators want to know how a state’s current business tax system compares to other states considered to be competitors for jobs and investment.

This study provides a state-by-state comparison of the tax liabilities that new investments in selected industries or types of economic activities would incur in each state, taking into consideration state and local statutory tax provisions and the financial and economic characteristics of the new investments. The analysis focuses on capital investments in industries that have location choices, such as factories or headquarters, rather than those that are tied to a specific geography, such as retailers or hotels. The estimated tax burdens on selected investments are combined to provide an overall measure of the business tax competitiveness of each state.

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