For Whom the Bell Tolls

Posted on April 12, 2006 | Author: Noah Clarke
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The West is known as a low-tax, business friendly part of the country, and Arizona is no exception. But the truth is four neighboring states have lower corporate income taxes than Arizona: Colorado, Utah, Texas and Nevada.

Arizona’s nearly seven percent corporate income tax rate ranks 29th lowest in the country; which is nice, but no cause for celebration when considering our neighbors. Colorado, Utah and Texas have corporate income tax rates at five percent or lower and Nevada doesn’t have one at all.

According to the Department of Labor, 70 percent of layoffs due to employer relocation stem from companies moving to other states within the U.S., not overseas. The higher a state’s taxes, the more costly it becomes to set-up shop, making it a less desirable place to do business.

Just as companies fled California for Arizona, they could also relocate to lower tax states like Utah and Nevada. Policymakers can ensure Arizona keeps its competitive edge by reducing the corporate income tax rate.

Noah Clarke is an economist with the Goldwater Institute Center for Economic Prosperity.

Key Links:

-Goldwater Institute: "Tax Man and the Moving: Fiscal Policy and State Population Shifts"
-Goldwater Institute: “Competition demands tax reductions”
-Tax Foundation: “State Business Tax Climate Index”
-U.S. Department of Labor: “Extended Mass Layoff Associated with Domestic and Overseas Relocations”

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