The Test Tank

The Tax Foundation has released its annual State Business Tax Climate Index, so be prepared to hear from anti-tax critics that Minnesota ranks #41. The study tracks a variety of factors in the tax system that the foundation says contribute to a competitive business climate. The main categories and their weightings in the overall ranking are: 1. 29.15% —Individual Income Tax Index 2. 21.50% —Sales Tax Index 3. 19.43% —Corporate Tax Index 4. 15.72% —Property Tax Index 5. 14.20% —Unemployment Insurance Tax Index The states with the best rankings? 1. Wyoming 2. South Dakota 3. Alaska 4. Nevada 5. Florida 6. Texas 7. New Hampshire 8. Montana 9. Delaware 10. Oregon The bottom 10 include: 41. Minnesota 42. Maine 43. Iowa 44. Nebraska 45. California 46. Vermont 47. New York 48. New Jersey 49. Ohio 50. Rhode Island No argument here that taxes on business are not the best way to raise revenue, or that in theory, lower taxes on business should be good for the economy. But it's also important to look at the results of public investment in a state that benefit business. Business tax climate is not the same thing as business climate — which also benefits from public investment in education, health care, transportation, and quality of life. When we look at other comparisons, being #41 on the business tax list doesn't look so bad. Education. Morgan Quitno's rankings of "Smartest States" de-emphasize spending for public schools and instead measure states based on student achievement, positive outcomes, and personal attention from teachers.

• Business tax top 10 – 1 "smartest state"
• Business tax bottom 10 – 5 "smartest states," including Minnesota

As for higher education, put it this way. If you were taking a smart kid on a college tour, which 10 states would you start with? If your business relied on scientific research, where would you locate? Health. Morgan Quitno ranks healthiest states, too.

• Business tax top 10 – 1 "healthiest state"
• Business tax bottom 10 – 6 "healthiest states," inclduing Minnesota

Half of the top 10 business tax states rank in the bottom 11 healthy states. Work Environment. The Political Economy Research Institute's Work Environment Index considers job opportunities, job quality, and workplace fairness. Here, the top 10 rankings are equally divided with three states each — again, including Minnesota — but three business tax top 10 states also fall to the bottom of the WEI. We maintain that average income growth is a good measure of economic health. Unfortunately, the comparative data for states isn't very current. The Economic Policy Institute's analysis of economic trends through 1998 included top 10 lists for states that had a growing income gaps — between top and the middle and bottom earners. Half of the top 10 business tax states also showed up on at least one of the lists of states with the widest income gaps. One possible conclusion of all this: Best for business taxes doesn't necessarily mean best for everyone. And this: Take all state comparisons with a grain of salt.