North Carolina has one of the 15 worst tax environments for small businesses in the country and the worst in the South, the Washington, D.C.-based Small Business & Entrepreneurship Council says in a report released Tuesday.
The Business Tax Index 2010 lumps North Carolina in with the likes of New York, California, New Jersey and Massachusetts due to the Tar Heel State’s relatively high tax rates on personal income and corporate profits. North Carolina also was penalized for having unemployment and gasoline taxes higher than most states. If not for the 12th lowest property tax rate as a percentage of household income in the United States, North Carolina would have ranked even lower.
North Carolina’s neighbors fared much better in the rankings, which assesses 16 different tax measures and combines those into one tax score that allows the 50 states and District of Columbia to be compared. South Carolina placed 12th in the rankings with a score of 29.646. Tennessee followed in the 13th spot with a score of 30.858, and Virginia wasn’t far behind, landing at No. 15 with a score of 32.393.
In comparison, North Carolina’s score was 42.473, the 15th highest on the list.
The Business Tax Index found the 10 best state tax systems to be 1) South Dakota, 2) Texas, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Alaska, 9) Ohio, and 10) Colorado.
The 10 worst state tax systems were determined to be: 42) Massachusetts, 43) Oregon, 44) Vermont, 45) Iowa, 46) Maine, 47) New York, 48) California, 49) Minnesota, 50) New Jersey, and 51) the District of Columbia.
“We applaud the political leaders of states who have refrained from raising taxes on the nation’s job creators,” said SBE Council President and CEO Karen Kerrigan. “Sales have been down and business owners continue to struggle with rising costs such as health care coverage. States that have kept taxes low will reap rewards as their businesses recover more quickly and shore-up durability for the long term. Low-tax states will become even more competitive for investment and business relocation.”