New report ranks Alabama No. 29 in nation for business climate

Alabama map

A new report released Tuesday from the Washington, D.C.-based Tax Foundation ranks Alabama at No. 29 in the nation in terms of business climate.

The conservative-leaning group think-tank cited a high sales tax and middling rankings when it comes to the cost of unemployment insurance and the corporate tax rate when assigning the state its rating.

Alabama’s relatively low property taxes and and personal income tax levels, on the other hand, were listed as better than average.

The No. 29 slot was good for some ten spots better than neighboring Georgia, but considerably lower than its southern neighbors in Florida, which structures its revenue base primarily on tourism and real estate.

Wyoming, South Dakota, Alaska and Nevada rounded out the top five along with the Sunshine State, which came in at No. 4.

Alabama border states Tennessee (No. 16) and Mississippi (No. 20) also scored somewhat higher in the foundation’s ratings.

Fiscally liberal bastions like Rhode Island, Vermont, Minnesota, California, New York were at the bottom of the list. New Jersey took home the dubious distinction of coming in very last among all states.

“The states in the bottom 10 tend to have a number of afflictions in common: complex, non-neutral taxes with comparatively high rates,” the study explained. “New Jersey, for example, is hampered by some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance tax and an estate tax, and maintains some of the worst-structured individual income taxes in the country.”

The news isn’t all bad for Alabama – the Tax Foundation authors said taxes aren’t everything, and that quality of life and infrastructure play a significant role in luring businesses as well.

“…[P]olicymakers routinely overestimate the degree to which tax policy affects business location decisions and that as a result of this misperception, they respond readily to public pressure for jobs and economic growth by proposing lower taxes. According to [Syracuse economist Michael] Wasylenko, other legislative actions are likely to accomplish more positive economic results because in reality, taxes do not drive economic growth.”

They do, however, remain a major factor.

“The taxes paid by businesses should be a concern to everyone because they are ultimately borne by individuals through lower wages, increased prices, and decreased shareholder value,” the authors wrote. “Every change to a state’s tax system makes its business tax climate more or less competitive compared to other states and makes the state more or less attractive to business.”


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