Washington Ranks 17th in the Nation in Tax Competitiveness

Washington ranks 17th in the nation on tax competitiveness according to the Tax Foundation’s 2018 State Business Tax Climate Index released today.

According to the Tax Foundation, the index measures how well each states tax code is structured, analyzing over 100 tax variables in five different tax categories: corporate, individual income, sales, property, and unemployment insurance. Washington state score 48th in sales taxes, 46th in corporate tax, 27th in property tax, 17th in unemployment insurance and 6th in individual income tax.

The Tax Foundation insists that the index is based not on tax burden, but transparency, neutrality and fairness. States with more complex codes that distort business decisions, the foundation says, do more poorly. Washington state’s poor showing on corporate tax, for example, is largely because of its Business and Occupation tax, which taxes companies base on their gross receipts. Even companies with no profits must pay those taxes.

While the amount of revenue a state raises gets a lot of attention, it doesnt tell the whole story about a states tax system, said lead-report author Jared Walczak, a senior policy analyst at the Tax Foundation.

Nevertheless, rankings tend to align closely with tax rates in each state. Arizona, for example, improved six places after its corporate income tax rate was lowered over several years to 4.9 percent. Higher income taxes in Kansas pulled that state down three places.

Our Index shows how thoughtful reforms can improve taxes in a way that benefits all taxpayers, said Tax Foundation Director of State Projects Scott Drenkard.

Wyoming, South Dakota, Alaska and Florida topped the list of the ten best states, while the lowest ranking were Vermont 47th, California 48th, New York 49th and New Jersey 50th.

The tax rankings could get more attention this year as states compete to be home to a second Amazon.com headquarters. The company is takinig bids for the opportunity to host the new campus for which it has promised to hire 50,000 employees and invest $5 billion. Bottom-ranking New Jersey is offering $7 billion in tax breaks to attract Amazon to the state.