In a 2013 report from the Tax Foundation, Texas fell from a top-ten list of best states for business tax climates for the first time. In this year’s report, the state regained its top-ten status by coming in at number ten. In explaining the reason for last year’s drop, an economist from the Tax Foundation said Texas’s overall tax structure remained stagnant over several years while other states made positive changes.
The Tax Foundation ranked states by how favorable they were to a business environment. One common factor present among the top states was the absence of a large tax that was otherwise common among other states. In Texas, one major tax that isn’t present is the state income tax.
Low or favorable tax structures aren’t the only thing that drives economic growth in states, though. According to experts, other factors that drive growth include the availability of natural resources or skill levels, energy and transportation costs and being near customer bases are all factors in a decision for business location. According to a study from Wells Fargo, favorable business tax structures don’t necessarily result in top business growth.
Favorable structures also don’t necessarily mean no one will experience tax issues. Businesses and individuals across Texas struggle with tax issues, from federal income or withholding discrepancies to problems paying things such as franchise taxes. Even in a state without an income tax, issues come up. Individuals facing tax problems should never ignore issues. A proactive approach may save money and heartache, and there are often legal ways to reduce tax burdens or seek assistance in repaying taxes owed.
Source: The Dallas Morning News, “Texas returns to list of top 10 states with best business tax climate, Wells Fargo economist sees little correlation to economic growth (Updated on Nov. 12)” Sheryl Jean, Oct. 31, 2014