Conservatively Speaking

Wisconsin's abysmal business climate ranking gets even worse

Posted by Mary Lazich on Sept. 22, 2009

Business, Taxes

The nonpartisan Tax Foundation in Washington D.C. keeps track of each state’s business climate. I have often blogged about Wisconsin’s dismal rankings, near the bottom of the pile. That’s no surprise, given how unfriendly Wisconsin is to business. 

The latest rankings are out, with the #1 state being the best state to do business and #50 the worst. The Tax Foundation reports:

“The top 10 states in the 2010 Index, from 1st to 10th, are South Dakota, Wyoming, Alaska, Nevada, Florida, Montana, New Hampshire, Delaware, Washington and Utah. The bottom 10 states, from 41st to 50th, are Vermont, Wisconsin, Minnesota, Rhode Island, Maryland, Iowa, Ohio, California, New York and New Jersey.”

Wisconsin ranks #42, a drop from a not so positive # 38 last year. Why the decline? According to the Tax Foundation:

“The blame for Wisconsin’s drop falls on the creation of a new income tax bracket: 7.75 percent on taxable income over $225,000.”

The new tax bracket hurts the wealthy that invest and create jobs.

The Tax Foundation writes:

“The ideal tax system, whether at the local, state or federal level, is simple, transparent, stable, neutral to business activity, and pro-growth. In such an ideal system, individuals and businesses would spend a minimum amount of resources to comply with the tax system, understand the true cost of the tax system, base their economic decisions solely on the merits of the transactions,

without regard to tax implications, and not have the tax system impede their growth and prosperity.”

Wisconsin doesn’t come close to meeting that definition of an ideal tax system when it throws one tack in the road after another, impeding the ability of businesses to advance and flourish.

Here are key points made by the Tax Foundation:

• Taxes can have a significant impact on an individual’s decision to become a self-employed entrepreneur.
• Complex, poorly designed tax systems that extract an inordinate amount of tax revenue are known to reduce both the quantity and quality of the labor pool.
• Every state must raise revenue, and thus every state must tax. No state, however, needs to tax in a way that has significant adverse effects on the business climate. A state needs to continually strive for a tax system that is neutral and pro-growth. A neutral tax system is one in which specific economic activities are not targeted for exemptions or selective taxes. A pro-growth system will avoid excessive taxes and compliance costs on businesses.

 You can read the entire Tax Foundation report here.

UPDATE: Another ranking, from Forbes.