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States climb tax rankings

Washington is ninth nationwide, group says

Washington and Idaho are at a standstill, and that proved to be a good thing Tuesday in new rankings from the Tax Foundation.

In its 2010 State Business Tax Climate Index, the nonpartisan watchdog group says Washington climbed to ninth among the 50 states, Idaho to 18th, largely because neither state made any significant adjustments to their tax structures while many others did so in response to budget shortfalls.

The index, according to the foundation, measures how well a state’s tax system encourages investment by maintaining a broad tax base and low rates.

Foundation economist Kail Padgitt said the rankings do not quantify the overall tax burden on business. Those figures will be released separately in October.

The top 10 ranking for Washington may be a first, but Padgitt said pre-2006 comparisons differ because the rankings switched that year from calendar to fiscal years. The rankings are a snapshot taken July 1.

Idaho was among the most-improved states, climbing from 29th in the 2009 index. Washington edged up from 12th in 2009.

The absence of an individual income tax weighed heavily in Washington’s favor, the high state and local sales taxes against.

Idaho property taxes are among the nation’s lowest – good for a No. 3 ranking – but the state fell to 48th in the ranking for unemployment insurance taxes.

Foundation President Scott Hodge was in Boise earlier this year warning lawmakers that the state, while ranking relatively well overall, trails every one of its contiguous states: Wyoming, No. 1; Nevada, No. 4; Montana, No. 6; Washington; Utah, No. 10; and Oregon, No. 14.

“The state is going to have to be much more competitive in terms of making tax changes,” he said Tuesday.

Washington had long been alone among the states in levying a tax on gross business revenues instead of profits. But Ohio imposed a similar tax in 2005, Michigan in 2007, and Kentucky, New Jersey and Texas have recently done the same.

“They are somewhat alarming,” Hodge said.

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