A new study from the accounting firm Ernst & Young and the Council on State Taxation has found that Virginia has the nation’s sixth lowest tax rate for companies making new investments.
The study, distributed Thursday by the office of Gov. Bob McDonnell (R), uses a complicated methodology that looks at the local and state taxes likely to be faced by companies as they make different kinds of capital investments. It takes into account a mix of tax rates set by law, as well as tax credits extended to some industries.
The results are sometimes surprising.While Virginia is known for its low tax rates, states that rank with lower rates don’t necessarily have the same reputation.
Using the study’s methodology, the five states with the lowest tax burden for businesses making new investments are Maine, Oregon, Ohio, Wisconsin and Illinois.
The five states that impose the highest tax burden on expanding businesses are West Virginia, Alabama, Mississippi, Tennessee and Hawaii--a list that includes states generally known for high taxes.
States that ranked with high tax burdens are generally those that have high sales tax rates--often imposed to keep income taxes low or non-existent.
The study’s authors say the results “suggest that legislators have not paid enough attention to the role of ‘sales’ in understanding tax burdens imposed on business investments and on-going operations.
“Virginia continues to be recognized for its pro-business environment. The Commonwealth is the best place in the nation for private-sector economic investment,” McDonnell said in response to the study.