Washington State: Ranked 11th on State Business Tax Climate Index

The Tax Foundation has recently released its 2015 State Business Tax Climate Index. The full report can be found here.

Washington State ranked 11^th overall on the index for best State Business Tax climate nationwide.

The purpose of the index is to enable "business leaders, government policymakers, and taxpayers to gauge how other states his tax systems compare."

In making its rankings, the Tax Foundation surveys each State's tax system comparing over 100 different variables in five areas of taxation (corporate, individual, sales, unemployment insurance and property). Then it compiles those results to create its final overall rankings.

However despite the fact that Washington scored well overall, it has one of the highest combined state and average local sales tax: at 8.88%.

Washington has the highest tax rate on spirits ($35.22 per gallon).

Looking at the corporate tax component alone, Washington ranked 28^th.

Looking at the individual income tax component alone, Washington ranked 6^th.

Looking at the sales tax component alone, Washington ranked 46^th.

Looking at the property tax component alone, Washington ranked 23^rd.

Looking at the unemployment insurance tax component alone, Washington ranked 19^th.

U.S. is in bottom 10% of OECD Countries for Tax Competitiveness

The Tax Foundation has recently issued its 2014 International Tax Competitiveness Index (ITCI) for the 34 OECD countries.

Overall, the United States ranked as 32^nd most competitive out of the 34 OECD countries (i.e. the bottom 10%). The ITCI notes that the largest factors behind United States's poor score are:

1. The US has the highest corporate income tax rate in the developed world (39.1%) (OECD average 25%),
2. The US is one of the only countries in the OECD that does not have a territorial tax system (the top 5 all have territorial tax systems),
3. The US has a relatively high progressive individual income tax (combined top rate 46.3%) which taxes both dividends and capital gains.

The top 5 and bottom 5 overall OECD Scores under the ITCI are:

	Country Name	ITCI Overall Score
1.	Estonia	100.0
2.	New Zealand	87.9
3.	Switzerland	82.4
4.	Sweden	79.7
5.	Australia	78.4
30.	Spain	50.8
31.	Italy	47.2
32.	United States	44.6
33.	Portugal	42.9
34	France	38.9

Within the OECD, the United States has the 3^rd worst tax environment as calculated by the ITCI. This puts it in the bottom 10% of the OECD. This has tremendous implications for long-term investment and job growth within the United States. Congress needs to address this reality and make our tax code more competitive with the rest of the OECD. As stated in the report:

In today's globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world in order to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investments in order to maximize their after-tax rate of return. If a country's tax rate is too high, it will drive investment elsewhere, leading to slower economic growth.

Washington State is Number 1! For liquor taxes…

Washington State has the highest liquor taxes in the nation! Washington residents, as the end purchaser, pay the following taxes on liquor (either directly, or as price markup for taxes paid by distributors and retailers):

• 20.5% sales tax on spirits,
• + a $3.77 per liter excise tax,
• + 17% of gross revenues of retailer (termed a "license fee")
• + 10% of gross revenues of distributors.

According to the Tax Foundation, this results in the highest liquor taxes in the nation, with some taxes approaching 100% of the sale price of some products. The Tax Foundation calculates Washington's state taxes on spirits at a $35.22 per gallon, whereas Idaho is $10.92 and Oregon $22.73 per gallon. The national median liquor tax is $5.53 per gallon.

All info from an excellent piece at the Tax Foundation.

Not surprisingly, this has resulted in Washington residents purchasing liquor in Idaho and Oregon. In response, there has recently been a bill introduced in the legislature to reduce the Washington sales tax from 20.5% to 6.5% over 8 years. Certainly this is a step in the right direction.

Sales Taxes (nationwide) going up.

The Rockefeller Institutes reports that total State Tax collections were up 6.1% year-over-year from 2012 to 2013 (through the end of 3^rd quarter, 2013). In fact, Q3 (2013) was the 15^th consecutive quarter in which revenues were up. Of these revenues, personal income revenues rose 5.3%, sales revenues rose 5.6% and corporate tax revenues rose 1.9%.

These significant increases in personal income revenues and sales tax revenues indicate growth of both personal income and consumption from 2012 to 2013 and the increases in revenues bode well for State government financing.

Resource: http://www.ftportfolios.com/Commentary/MarketCommentary/2014/1/13/week-of-january-13th

Attorney Jess Monnette now licensed to practice in Idaho!

Effective October 3, 2013, Jess Monnette is now admitted to practice law in the State of Idaho. Although Jess will continue to practice in Wenatchee and throughout North Central Washington, he is eager to expand his practice to serve clients in Idaho.

Jess's practice areas include Business Law, Creditor & Debtor, Estate Planning & Wills, Probate, Elder Law, Tax Law & Planning, IRS disputes and Real Estate.