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Why be WY? Business taxes already low here

The Stand

tax-foundationWASHINGTON, D.C. (Oct. 29, 2014) — The Tax Foundation, a conservative corporate-funded think tank, on Tuesday released its annual 2015 State Business Tax Climate Index that “enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.” For the third straight year, Washington state ranks 11th best in the nation.

In this context, “best” means lowest. The Tax Foundation considers all taxes — those paid both by corporations and by individuals — to be a burden on businesses. It makes no attempts to gauge the effect of what those taxes provide, i.e. public schools and universities, roads and transportation systems, and other state services that support businesses. Most would agree that an educated and trained workforce, freight mobility, and general quality of life have a dramatic effect on where businesses locate, and where they will thrive.

The Tax Foundation considers Wyoming the “best” state in the nation in terms of low business taxes, but other state business climate rankings that try to account for such non-tax factors rank it significantly lower. CNBC ranks Wyoming 21st best and Forbes says it’s 23rd. (In those rankings, Washington comes in 7th and 9th, respectively.)

The Tax Foundation’s underlying premise is that low taxes lead to more jobs and a stronger economy. But do they?

Business Insider ranks the actual performance of state economies, based on their unemployment rates, the number of non-farm payroll jobs, gross domestic products, average wages, the working age populations, value of international exports, house prices, and auto sales. In the Business Insider rankings, Wyoming ranks 26th and Washington state ranks 7th.

washington-CEO-round-tableIn fact, there is no apparent correlation at all between the low-tax and strong-economy lists.

The Tax Foundation’s Top 4 states for low business taxes — Wyoming, South Dakota, Nevada and Alaska — are ranked 26th, 27th, 9th and 50th, respectively, by Business Insider for actual economic performance. The Business Insider’s Top 4 performing states — Colorado, California, Texas and Arizona — rank 20th, 48th, 10th and 23rd on the low taxes list.

So in 2014, for every state that has both low business taxes and a strong economy (Texas), there is a state with high taxes and a strong economy (California), or one with low taxes and a lousy economy (Alaska).

What then should Washington policymakers take away from these latest Tax Foundation rankings?

1)  As judged by conservative billionaires and corporations, Washington is definitely “competitive” in terms of business taxes. (Among the Tax Foundation’s funders are the Koch Foundation and on its board you’ll find representatives of Microsoft, Eli Lilly, PepsiCo, PriceWaterhouseCooper, etc.)

2)  When in-state corporate lobbying groups claim “Washington has one of the highest business tax burdens of any state in America,” recognize that their corporate clients pay them to lobby for lower business taxes and they will never, ever acknowledge that business taxes here are comparably low. They will parse these studies, or finance their own, to conclude the opposite. Every time. Because that’s their job.

3)  We could cut business taxes even more in Washington to be more like Wyoming, but there is no reason to believe that would create jobs or help the state economy. Nor is there any reason to believe that raising taxes would necessarily harm the economy.

So… good luck next session with that whole McCleary thing.

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