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Report: Tennessee Business Tax Friendliness Ranking Drops

Tennessee politicians often boast that the state has one of the friendliest businesses climates in the country, but a recent report indicates the state sits squarely in the middle of the pack compared to other states.

In fact, Tennessee’s ranking fell five slots to 27 out of 50 states in this year’s State Business Tax Climate Index released this month by the Tax Foundation, a research group based in Washington, D.C.

Last year, Tennessee was slotted at 22 among states measured for its tax friendliness. From 2006 to 2009, the state’s rank had hovered around the high teens and low twenties.

In this year’s report, the Volunteer State scored well for lacking an income tax but poorly when compared on its high sales tax and unemployment insurance rate.

Among the most business tax friendly states were South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah and Indiana, according to the report.

The worst included North Carolina, Rhode Island, Minnesota, Maryland, Iowa, Ohio, Connecticut, New Jersey, California and New York.

The report indicates that tax incentives and subsidies offered by state governments are usually indications that officials are trying to make up for a “woeful business tax climate.” They do better to consider long-term business tax reform, according to the report.

Image courtesy of The Tax Foundation 2011 State Business Tax Climate Index.

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