Despite low corporate and unemployment insurance tax rates, Colorado fares comparatively poorly in a new analysis of state tax costs on businesses.
Colorado ranked 33rd overall among the 50 states for tax costs on mature businesses and 47th overall for tax costs on new firms in the study conducted by the Tax Foundation in Washington, D.C.
The Tax Foundation, a nonpartisan and nonprofit tax research organization, compiled a comprehensive measurement of tax liabilities for existing and new businesses in different industries in each state.
The results reflect sometimes large differences among different businesses even within the same state, said Scott Hodge, president of the Tax Foundation. “Corporate taxes on the state level rarely treat all comers equally, leading to sometimes dramatic disparities in the cost of doing business,” Hodge said. “Tax preferences and incentive deals can distort the playing field based on how long a business has been operating, whether it’s a manufacturing or retail operation or whether it’s moved from another state to set up shop.”
Colorado fared best in the analysis for tax costs on mature retail firms, ranking 19th with a total effective tax rate (TETR) of 15.4 percent, about 9 percent below the national average. Colorado ranked 20th for tax costs on mature corporate offices. In both cases, low corporate and unemployment tax rates helped lower overall tax costs.
Colorado fared less well for tax costs imposed on mature, capital-intensive manufacturing firms, ranking 29th with a TETR of 15.5 percent, 22 percent above the national average. Property taxes that rank among the 10 highest in the nation for such firms, raised tax costs.
In assessing the effects of taxes on newly established companies, Colorado ranked 45th for tax costs on capital-intensive manufacturing firms and 47th for labor-intensive manufacturing firms. High property taxes once again pushed Colorado to the bottom of the rankings. Despite exempting manufacturing machinery from sales tax, Colorado ranks below average for all manufacturing firm types.
The states that ranked the best overall for low tax costs on mature firms were Wyoming, followed by South Dakota, George, Nevada and Ohio. Pennsylvania came in last in the rankings at 50th, followed by Hawaii, West Virginia, Kansas and Rhode Island.