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Pennsylvania near middle of the pack in business tax climate analysis

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Pennsylvania places near the middle of a nationwide look at taxes and their impacts on businesses from one state to the next.

The Keystone State ranked No. 29 in the Tax Foundation’s recently released report, 2020 State Business Tax Climate Index. The analysis delved into a number of factors impacting businesses, including corporate and individual tax rates, in addition to the amount levied in sales, property and unemployment insurance taxes.

In the report, researchers with the Washington, D.C.-based think tank weighted various aspects of a state’s tax laws differently before prescribing the specific ranking.

Individual income taxes, for instance, comprised 30.2 percent of the overall score, while unemployment insurance taxes made up 9.5 percent of the total.

Pennsylvania’s categorical scores were a mixed bag. Researchers ranked the state No. 17 in sales taxes, No. 19 in individual taxes and No. 21 in property taxes.

But it was near the bottom of all states across the country for unemployment insurance taxes, where it ranked No. 42, and corporate taxes, where it was No. 46.

“Pennsylvania has one of the highest-rate and least competitive corporate income taxes in the country, contrasted with a highly competitive individual income tax,” a statement from the organization reads, looking at the different factors.

In the report, Jared Walczak, the foundation’s director of state tax policy, noted the disparities in states’ corporate tax rates across the country.

“Iowa’s 12-percent corporate income tax rate qualifies for the worst-ranking among states that levy one, followed by New Jersey’s new 11.5-percent rate, including a surcharge,” Walczak wrote.

In the report, Walczak continued, “Other states with comparatively high corporate income tax rates are Pennsylvania (9.99 percent), Minnesota (9.8 percent), Alaska (9.4 percent) and California (8.84 percent).”

On the other end of the spectrum, Walczak said North Carolina had the lowest corporate tax rate, at 2.5 percent, followed by North Dakota, at 4.31 percent, and Colorado, at 4.63 percent.

While Pennsylvania scored a high ranking in the sales tax category – which accounted for 24 percent of the total ranking score – Walczak did note in the report one area where the state stands out.

“State excise taxes on gasoline range from 58.7 cents in Pennsylvania to 14.34 cents per gallon in Alaska,” Walczak wrote in the report.

Walczak and others with the Tax Foundation explained the rationale for looking into state tax rates across the country.

“It is important to remember that even in our global economy, states’ stiffest competition often comes from other states,” Walczak wrote in an executive summary. “The Department of Labor reports that most mass job relocations are from one U.S. state to another, rather than to a foreign location.”

The top performers overall in the Tax Foundation’s 2020 state business tax climate index were Wyoming, South Dakota, Alaska, Florida and Montana.

The bottom states in the foundation’s analysis were Connecticut, Washington, D.C., California, New York and New Jersey.

Two neighboring states – Delaware and West Virginia – outperformed Pennsylvania with rankings of No. 11 and No. 23, respectively.

Pennsylvania scored a higher ranking than its other neighbors, however, including Ohio (No. 38), Maryland (No. 43), New York (No. 49) and New Jersey (No. 50).