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California Taxes — Flight From the State — Where Does it Rank Among Other States? Answer = Third Worst!

Editor’s Note:  I saw an article in the OC Register on January 28, entitled “State Taxes Among Highest, Group Says,” in which the Tax Foundation found that California’s business tax climate is the third worst in the United States.  In fact, at least of the date of this article, if you go to their main website at https://taxfoundation.org/ you’ll see a link to “What States Are Best For Business” at https://taxfoundation.org/research/show/22658.html.  There you will get a bird’s eye view of the U.S. and for Californians, there is where you’ll find trouble with our great State.

This article also reminded me of the many, many “War Stories” that attorneys love to tell about cases in which they achieved victory.  Only this time, the War Story that comes to mind for me ended on an unhappy note – – i.e., a company I represented was so upset with the certain unnamed California taxing agency, they simply pulled out of California, and with them, hundreds of jobs which in turn, disrupted families and communities.  Obviously, over the past couple of years, I have seen this happening more and more given the economic recession, as article after article showed how deep the recession has struck Californians, and how CEO’s rank California as the worst for business, how bankruptcies have risen significantly and are the second highest in the U.S.  More and more individuals and businesses are flying out of the State.

The article goes on to state that Governor Jerry Brown is promoting initiatives for the November ballot to increase certain taxes – the Governor wants to increase both sales tax and income tax on the highest individuals over the next five years.

Let’s look at the recent study by the Tax Foundation, a nonpartisan conservative research group based in Washington, D.C.  According to the report, the 10 best states in this year’s Index are:

1. Wyoming

2. South Dakota

3. Nevada

4. Alaska

5. Florida

6. New Hampshire

7. Washington

8. Montana

9. Texas

10. Utah

The 10 lowest ranked, or worst, states in this year’s Index are:

41. Iowa

42. Maryland

43. Wisconsin

44. North Carolina

45. Minnesota

46. Rhode Island

47. Vermont

48. California

49. New York

50. New Jersey

New Jersey scores at the bottom by having the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax. Rhode Island has improved from 47th to 46th by implementing a modest individual income tax reform, but still has the worst unemployment tax system and fifth-worst property tax system. Maryland improved from 44th to 42nd this year due mostly to the expiration of the state’s “millionaire’s tax” on high-income earners. The states in the bottom 10 suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.

2012 State Business Tax Climate Index Ranks and Component Tax Ranks

State
Overall Rank
Corporate Tax Rank
Individual Income Tax Rank
Sales Tax Rank
Unemployment Insurance Tax Rank
Property Tax Rank
Alabama 20 16 18 41 11 6
Alaska 4 27 1 5 28 13
Arizona 27 28 17 50 1 5
Arkansas 31 36 27 38 17 18
California 48 43 50 40 13 17
Colorado 16 20 16 44 23 9

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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