Tax Foundation ranks New Jersey dead last in tax-friendly analysis

TRENTON – New Jersey, notorious for high property taxes, car insurance rates, “Jersey Shore” (the MTV show) and several other cost of living measures, is also the unfriendliest state for businesses, according to the Tax Foundation.

New Jersey ranked dead last at 50 out of 50 states in the foundation’s State Business Tax Climate Index, a comparative analysis between the different taxes in each state.

The foundation said that New Jersey “scores at the bottom by having the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax.”

Gov. Chris Christie has frequently mentioned that neighboring New York and Pennsylvania have  lower, more competitive tax systems and are better at attracting employers. He has steadfastly refused to reinstate the millionaire’s tax that Democrats have repeatedly called for. In fact, the governor called for going farther in the opposite direction as evidenced by his call for a three-year, across-the-board income tax cut.

New York, however, didn’t rank much better, finishing in 49th place.  Pennsylvania, which  has a flat tax of 3.07 percent, came in much better, ranking number 19.

Wyoming, Florida and Texas were ranked among the best states, according to the analysis.

“Even in our global economy, a state’s stiffest and most direct competition often comes from other states,” foundation economist Mark Robyn said.  “State lawmakers need to be aware of how their states’ business climates match up to their immediate neighbors and to other states in their region.”

The 10 best states in this year’s 2012 Index are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), New Hampshire (#6), Washington (#7), Montana (#8), Texas (#9), and Utah (#10). Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.

Joining New Jersey and New York were Iowa (#41), Maryland (#42), Wisconsin (#43), North Carolina (#44), Minnesota (#45), Rhode Island (#46), Vermont (#47) and California (#48).

On Wednesday, Christie said the tax analysis probably didn’t factor in the property tax cap of 2 percent and the pension and health benefits legislation, both of which are expected to produce savings, but not immediately.

The foundation did mention for New Jersey, in particular, some things it didn’t include in the analysis and consequently lead to some optimism.

Although New Jersey has consistently ranked at the bottom of the Index, recent actions by the state show the beginnings of improvement in the business tax climate. These include reducing the minimum tax on S corporations and reducing restrictions on the ability of taxpayers to carry forward net operating losses. While these changes

will not be captured by the current methodology of the Index, they would help to offset some of the

negative components of the state’s tax system for those businesses affected. New Jersey still ranks

behind New York (49th) and California (48th), but pending proposals in the three states could rise.

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TRENTON – New Jersey, notorious for high property taxes, car insurance rates, “Jersey Shore” (the MTV show) and several other cost of living measures, is also the unfriendliest state for businesses, according to the Tax Foundation.

New Jersey ranked dead last at 50 out of 50 states in the foundation’s State Business Tax Climate Index, a comparative analysis between the different taxes in each state.

In its analysis, the foundation said New Jersey has the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax.

Gov. Chris Christie has frequently mentioned the seemingly-better climates in New York and Pennsylvania as reasons to not reinstate the so-called “Millionaire’s Tax” that Democrats have called for. However, New York wasn’t much better, finishing just behind Joisey at number 49. Pennsylvania, which has a flat income tax of 3.07 percent, ranked much better, ranking number 19 overall.

Just last week, Christie called for going farther in the opposite direction, calling for an across-the-board 10 percent income tax cut, phased in over three years.

“Even in our global economy, a state’s stiffest and most direct competition often comes from other states,” foundation economist Mark Robyn said in a statement. “State lawmakers need to be aware of how their states’ business climates match up to their immediate neighbors and to other states in their region.”

The foundation pointed out While New Jersey remained steady compared with 2011, Rhode Island improved by implementing a modest income tax reform. The states in the bottom ten generally have complex, non-neutral taxes with comparatively high rates.

The 10 best states in this year’s 2012 Index are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), New Hampshire (#6), Washington (#7), Montana (#8), Texas (#9), and Utah (#10). Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.

Joining New Jersey and New York as the lowest ranked states are Iowa (#41), Maryland (#42), Wisconsin (#43), North Carolina (#44), Minnesota (#45), Rhode Island (#46), Vermont (#47) and California (#48).

Illinois moved most dramatically in its Index rank over the past year, falling twelve places after a significant income and corporate tax increase. In his State of the State, Christie mentioned Illinois as another state  that was raising taxes to address its problems.

In a press conference Wednesday, Christie said the report probably did not take into consideration the 2 percent property tax cap or the savings from pensions and health benefits reform legislation, since the savings aren’t immediately noticed.

The foundation did take note of certain things that happened in the state but weren’t reflected in the report.

“Although New Jersey has consistently ranked at the bottom of the Index, recent actions by the state show the beginnings of improvement in business tax climate,” the foundation said. “These include reducing minimum tax on S corporations and reducing restrictions on the ability of taxpayers to carry forward net operating losses. While these changes will not be captured by the current methodology of the Index, they would help to offset some of the negative components of the state’s tax system for those businesses affected. New Jersey still ranks behind New York and California, but pending proposals in the three states could see New Jersey rising.”<–>

Tax Foundation ranks New Jersey dead last in tax-friendly analysis