SBE Council's "Business Tax Index" Ranks State Tax Systems

Today, the Small Business & Entrepreneurship Council (SBE Council) published the "Business Tax Index 2012: Best to Worst State Tax Systems for Entrepreneurship and Small Business." The index ranks the 50 states and District of Columbia according to the costs of their tax systems for entrepreneurship and small business.

(To view the interactive U.S. map with each state ranking, please click here.)

Raymond J. Keating, chief economist for SBE Council and author of the report, said: "While 'Tax Day' 2012 is officially April 17, it is critical to understand that federal, state and local taxes are a burden on entrepreneurs, investors and the economy throughout the year."

Keating added: "All taxes matter, whether imposed at the federal, state or local level of government. They matter to consumers, entrepreneurs, investors and businesses. State and local levies matter in terms of a state's competitiveness. And they matter when it comes to economic growth and job creation."

SBE Council's "Business Tax Index 2012" pulls together 18 different tax measures, and combines those into one tax score that allows the 50 states and District of Columbia to be compared. Among the taxes included are income, capital gains, property, death/inheritance, unemployment, and various consumption-based taxes, including state gas and diesel levies.

According to the "Business Tax Index 2012," the 15 best tax systems are: 1) South Dakota, 2) Texas, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alaska, 8)Alabama, 9) Ohio, 10) Colorado, 11) Mississippi, 12) Michigan, 13) South Carolina, 14) Tennessee, and 15) Missouri.

The 15 worst state tax systems are: 37) Nebraska, 38) North Carolina, 39) Illinois, 40) Oregon, 41) Rhode Island, 42) Connecticut, 43) Hawaii, 44) Vermont, 45) California, 46) Maine, 47) Iowa, 48) New York, 49) New Jersey, 50) Minnesota, and 51) District of Columbia.

In terms of recent policy changes, it's worth noting that some states have made steps forward on providing some tax relief, such as Indiana, Arizona, Maine, Michigan, North Dakota, Delaware, Oklahoma, along with Ohio. In contrast, other policymakers worked against entrepreneurship by making state taxes less competitive, such as Oregon, Connecticut, Illinois and New York.

Small Business Tax Measure Proposed by U.S. House Leaders Will Free Up Capital for Entrepreneurs

Cash flow and access to capital are major concerns for small business owners as they struggle through the weak economic recovery. The pressure of rising costs, including the spike in gas prices and increares in health coverage premiums, are squeezing small business owners and they need immediate relief. That is why the Small Business & Entrepreneurship Council (SBE Council) is supporting House Majority Leader Eric Cantor's (R-VA) "Small Business Tax Cut," as it will provide critical assistance to capital-starved entrepreneurs.

SBE Council chief economist Raymond J. Keating said, "In the current atmosphere, small business owners are worried about the threat of higher taxes. Moving in the opposite direction would be a welcome change. The debate should be about how to reduce tax burdens on the entrepreneurial sector of our economy. This 20 percent tax cut for smaller businesses is a step in the right direction."

SBE Council President & CEO Karen Kerrigan added, "Ideally, the Congress and the White House should have moved on early opportunities to fundamentally restructure the tax system where all rates are cut and the fix is permanent. This did not happen, yet small businesses desperately need relief. The 20 percent tax deduction would infuse small businesses with the capital they need to withstand economic headwinds and costs that continue to work against them."

A strvey released last week by SBE Council found that higher gas prices were adding to the strain of small business owners. In fact, 43 percent of small business owners said their firms would not survive if gas prices remained high or increased further.

"Getting our nation's economy back to strong and sustained growth needs to be a top priority for our elected officials. High confidence and robust job creation in the small business sector is central to that end. The 20 percent tax cut for small business owners is not only needed, it will have an immediate impact on the economy," added Kerrigan.