A new report from the Tax Foundation ranks Kentucky’s Business tax climate 33rd in the nation. The foundation hopes the report will serve as a guide while both the state and federal governments consider tax reform.
The Business Tax Climate Index examines how competitive a state’s tax code is, and how well it encourages businesses to locate in that state.
“When we look at Kentucky, the reason the state ranks a little below average on our index, isn’t, say, the corporate income tax rate. It is things like the fact that Kentucky has an inventory tax," said Jared Walczak, lead author of the report.
An inventory tax is a tax placed on inventory held in the state by businesses. Walczak said, by comparison, Indiana ranked ninth overall on the index.
“Indiana offers a great example of a state that imposes all of the major taxes but does so in a relatively neutral manner, where they’re trying to avoid picking winners and losers. They have low rates and broad bases,” he said.
Walczak said Indiana’s tax code also has fewer exemptions compared to most states. Tennessee is ranked 14th in the index. He said Tennessee was helped in the rankings because it has no state income tax. Wyoming finished first in the index rankings, with New Jersey coming in last.