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Delaware's healthy business tax climate earned it a No. 8 ranking among the 50 states in the 2010 State Business Tax Climate Index, The Tax Foundation's annual ranking.
The study, authored by Tax Foundation staff economist Kail Padgitt, moves Delaware up two spots compared to last year, restoring it to its 2007 position.
The absence of a sales tax in Delaware contributed to its continued high ranking, according to the study.
"The lesson is simple; a state that raises sufficient revenue without one of the major taxes will, all things being equal, out-compete those states that levy every tax in the state tax collector's arsenal," Padgitt wrote. "Delaware ranks eighth despite a dreadful corporate income tax that ranks as the second worst in the nation."
The states ranking better than Delaware are South Dakota (1st), Wyoming (2nd), Alaska (3rd), Nevada (4th), Florida (5th), Montana (6th) and New Hampshire (7th). Neighboring states ranked as follows: Maryland (45th), Pennsylvania (27th) and New Jersey (50th).
Also notable is that Delaware slipped from a rank of 28th in the Individual Income Tax Index in 2009 to 35th in 2010.
Delaware ranked as follows in the major components of the index: Corporate Tax Index Rate (49th), Individual Income Tax Rate (35th), Sales Tax Index Rate (1st), Unemployment Insurance Tax Index Rate (13th) and Property Tax Index Rate (7th).
Delaware's favorable ranking overall is a positive sign amidst all of the negative news regarding the economy, says Garrett Wozniak, policy director for the Caesar Rodney Institute. The Caesar Rodney Institute,based in Dover, is a nonprofit research and educational organization.
"Policymakers should take note that the actions of other states do not give a free pass to mimic tax and fee increases," Wozniak says.
As Delaware is one of only five states with both a corporate income tax and a gross receipts tax, policymakers should at the very least roll back the recent increases in the gross receipts tax, according to the Caesar Rodney Institute. Additionally, the state can further improve the business tax climate by allowing deductions from gross receipts for employee compensation costs and allowing similar deductions for the cost of goods sold. (Delaware does not offer full deductions for either category.)
The ranking also highlights the importance of business to the state where 34 percent of revenues come from abandoned property, the corporate franchise tax and the corporate income tax combined, according to Caesar Rodney officials. The institute believes elected officials should work to maintain its high ranking by keeping taxes low, resisting burdensome regulations and ensuring that the state remains competitive.
Delaware's healthy business tax climate earned it a No. 8 ranking among the 50 states in the 2010 State Business Tax Climate Index, The Tax Foundation's annual ranking.
The study, authored by Tax Foundation staff economist Kail Padgitt, moves Delaware up two spots compared to last year, restoring it to its 2007 position.
The absence of a sales tax in Delaware contributed to its continued high ranking, according to the study.
"The lesson is simple; a state that raises sufficient revenue without one of the major taxes will, all things being equal, out-compete those states that levy every tax in the state tax collector's arsenal," Padgitt wrote. "Delaware ranks eighth despite a dreadful corporate income tax that ranks as the second worst in the nation."
The states ranking better than Delaware are South Dakota (1st), Wyoming (2nd), Alaska (3rd), Nevada (4th), Florida (5th), Montana (6th) and New Hampshire (7th). Neighboring states ranked as follows: Maryland (45th), Pennsylvania (27th) and New Jersey (50th).
Also notable is that Delaware slipped from a rank of 28th in the Individual Income Tax Index in 2009 to 35th in 2010.
Delaware ranked as follows in the major components of the index: Corporate Tax Index Rate (49th), Individual Income Tax Rate (35th), Sales Tax Index Rate (1st), Unemployment Insurance Tax Index Rate (13th) and Property Tax Index Rate (7th).
Delaware's favorable ranking overall is a positive sign amidst all of the negative news regarding the economy, says Garrett Wozniak, policy director for the Caesar Rodney Institute. The Caesar Rodney Institute,based in Dover, is a nonprofit research and educational organization.
"Policymakers should take note that the actions of other states do not give a free pass to mimic tax and fee increases," Wozniak says.
As Delaware is one of only five states with both a corporate income tax and a gross receipts tax, policymakers should at the very least roll back the recent increases in the gross receipts tax, according to the Caesar Rodney Institute. Additionally, the state can further improve the business tax climate by allowing deductions from gross receipts for employee compensation costs and allowing similar deductions for the cost of goods sold. (Delaware does not offer full deductions for either category.)
The ranking also highlights the importance of business to the state where 34 percent of revenues come from abandoned property, the corporate franchise tax and the corporate income tax combined, according to Caesar Rodney officials. The institute believes elected officials should work to maintain its high ranking by keeping taxes low, resisting burdensome regulations and ensuring that the state remains competitive.
