In the Tax Foundation's 2013 State Business Tax Climate Index, Alaska was ranked 4th best overall based heavily on its lack of an individual income tax or statewide sales tax. The index represents the tax climate of each state as of July 1, 2012, typically the start of the fiscal year.
States without a tax ranked equally as a 1. Alaska's ranking for each tax component for 2013, compared to higher ranking states, is shown below:
The three states that rank ahead of Alaska have low corporate tax rates and individual income tax rates, but do have a sales tax component in their revenue stream. Alaska does not have a statewide sales tax; it's 5th place ranking is based on a weighted average of local sales taxes.
The Tax Foundation utilizes individual income taxes in its ranking because many types of businesses report their income through the individual income tax code. Thus, this favorable ranking for Alaska is not likely to influence investment decisions for corporations where Alaska is ranked in the lower half of all states. Alaska's corporate tax rank dropped two places from 2012.
The report notes "Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state's economy....a state with lower tax costs will be more attractive to business investment, and more likely to experience economic growth."
Read the full report here.
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