Companies Are Embracing States That Embrace Tax Cuts, Surveys Show

Tax policies are becoming increasingly determinative of states‘ economic performance and outlook. That reality has been the norm in Chief Executive’s annual Best & Worst States for Business rankings, due out May 7th, and it has been underscored again by the release of the latest annual Rich States, Poor States assessment report by the American Legislative Exchange Council (ALEC).

Similar to Best & Worst States for Business, in which CEOs rate their states on three criteria: tax and regulatory regime, the quality of the workforce, and the quality of the living environment, states that are attempting to foster growth with tax cuts and other business-friendly fiscal policies tended to improve or stay at or near the top in the annual ALEC index, while historically and persistently high-tax states continued to languish at the bottom.

“The big story this year is the bipartisan embrace of state tax cuts.”

“The big story this year is the bipartisan embrace of state tax cuts,” said Jonathan Williams, vice president of the ALEC Center for State Fiscal Reform and co-author of the report. “States are increasingly realizing the need to become more competitive through fiscal responsibility and free market economic reforms. We anticipate 2015 will be a record year for pro-growth tax reform.”

Kentucky was the biggest winner in the rankings this year, improving by nine spots to No. 30 for economic outlook. Illinois came in second for improvement by climbing eight spots to No. 40, while Oklahoma improved by five spots to No. 16, and Wisconsin climbed by four spots to No. 13.

On the other hand, Michigan, despite tax-trimming policies of Gov. Rick Snyder, fell the most, by 12 spots, to No. 24, while Delaware fell 11 spots to No. 38, Pennsylvania fell eight spots to No. 41, and South Dakota fell seven spots to No. 9.

By comparison, in Best & Worst States for Business, CEO respondents ranked Kentucky 25th in 2014; Illinois 48th; Oklahoma 20th; and Wisconsin 14th. Texas, the poster child for growth of late, has come in 1st in every ranking for the last 10 years, while California has consistently come in last over the past few years.

While the bottom 10 states largely remain mired in business-unfriendly modes especially through their tax policies, ALEC concluded, “Rich States, Poor States” showed a lot of dynamism among top states largely due to tax cuts, and CEOs are taking notice.

Chief Executive’s Best & Worst States for Business 2015 ranking will be unveiled on May 7.


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