The Tax Foundation released its annual State Business Climate rankings for 2022 last week. Overall, Vermont scored 2nd worst in New England at 43, behind only Connecticut at 47.
The Individual Income Tax ranking was 2nd highest in New England, behind only Connecticut, at 47. It gets a 31.2% weight in the overall score. This ranking looks at such items as the top marginal tax rate, the number of brackets, income recapture and double taxation of capital income.
Our Sales Tax rank was in the middle of the pack, 16th highest in the country, and lower than Connecticut and Rhode Island, but higher than Massachusetts, Maine and New Hampshire, which doesn’t have any sales tax. This accounts for 23.7% of the overall score. While the rank is based on the overall tax rank, local sales tax rates, remote seller protections, sales tax breadth and excise taxes are all included in the sales tax rank score.
Our Corporate Tax Rate was highest in the New England, the 43rd highest in the country, accounting for 20.9% of our overall score. The Corporate Tax Rate includes such areas as Global Low-Taxed Intangible Income, Net Interest limitation, Alternative Minimum Tax, Deductibility of Depletion, Gross Receipts Tax Deductions and tax credits.
Our property tax rate was 49th out of 50 states, behind only Connecticut. As a region, all of New England does abysmally, with the 6 New England states all falling in the top 10 highest property taxed states in the region. Luckily for New England, the property tax rate only gets a 14.4% weight in the overall score. The subindex includes property tax collections per capita, tax collections as a percent of personal incomes and capital stock taxes.
One silver lining: Vermont taxes unemployment insurance at a lower rate than any of our New England neighbors, and 15th lowest in the country. Unfortunately, this ranking only gets a 9.8% ranking in the overall score. Which makes sense, because potential movers are more likely to compare income taxes, rather than insurance taxes before they move.
For each of the past 8 years, Vermont has barely budged in the rankings, ranking #42 in 4 years and #43 in 4 of the years. As Vermont’s ARPA funds dry up, it will become even more important to make Vermont friendlier to business. Relying on federal funding is a very risky long-term play for the economy.
To read the Tax Foundation’s 2022 state Business Climate Index, click here.
David Flemming is a policy analyst for the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.