The Tax Foundation’s 2014 edition of the State Business Tax Climate Index was released on Oct. 9. The 2014 Index represents the tax climate of each state as of July 1, 2013, the first day of the standard 2014 state fiscal year.
“The states that lost ground this year usually did so because they changed policy in a way that makes the tax code more complex, burdensome, or economically harmful,” said Tax Foundation economist Scott Drenkard.
The Tax Foundation’s 2014 State Business Tax Climate Index is a hierarchical structure built from five components:
- Individual Income Tax
- Sales Tax
- Corporate Income Tax
- Property Tax
- Unemployment Insurance Tax
Using the economic literature as their guide, the foundation designed these five components to score each state’s business tax climate on a scale of zero (worst) to 10 (best). Each component is devoted to a major area of state taxation and includes numerous variables. Overall, there are over 100 variables measured in this report.
The states are then compared against each other, so that each state’s ranking is relative to actual policies in place in other states around the country. A state’s ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states.