Maryland ranks 29th among the 50 states in the competitiveness of its tax code in attracting new business and keeping existing firms, while neighboring Virginia ranked 13th, according to the Tax Foundation?s 2007 State Business Tax Climate Index. Virginia climbed four places in the Index over last year, while Maryland fell four places.
But the raw rankings don?t begin to tell the whole story.
A state?s total take in all taxes is one way of comparing jurisdictions because taxes matter a great deal in determining where new businesses and jobs are created and located. But not all taxes are created equally and in that respect it becomes easier to understand why Virginia ranks so much higher in the Tax Foundation?s tax competitiveness index.
The index uses 116 variables to rank states according to their relative positions on five tax tools, including corporate taxes, individual income taxes, sales tax, unemployment insurance tax and property tax rates.
Virginia has the fifth-best corporate tax index score and the sixth-best sales tax index. Even in two of the remaining three areas, the commonwealth is among the most reasonable, ranking 17th in individual income taxes and unemployment insurance taxes. Only on property taxes does Virginia drop into the lower half among all the states, and then only to 26th.
By contrast, Maryland looks good on corporate taxes and sales tax at seventh and eighth, respectively, but plummets on the other three measures, showing 35th on individual income taxes, 30th on unemployment and 41st on property taxes.
Put otherwise, Maryland taxes individuals and their property much more severely than most other states, and especially so compared to Virginia.
In addition to maintaining a lower comparative overall tax burden on its residents, the commonwealth also displays greater balance than Maryland in how it apportions its taxing activities among the five tools covered by the Tax Foundation?s index.
Some other more general observations are suggested by the index, beginning with the prevalence among the top 10 states of jurisdictions in the South and West, with only New Hampshire making it from the Northeast and Delaware from the Mid-Atlantic.
The booming economies of Nevada, Florida and Texas are fourth, fifth and sixth. By contrast, the bottom 10 states include six from the Northeast, as well as Ohio and Minnesota from the industrial Midwest and California.
The Tax Foundation?s Index is an extremely useful tool for voters seeking to assess the competing promises and rhetoric of candidates seeking public office in both states.
Among other things, the index puts into a useful perspective the fact that most job transfers are from one state to another, not from the U.S. to a foreign country, as is so often claimed on the campaign hustings. For more information on the index, visit www.taxfoundation.org/news/show/1923.html.
