Colorado ranks eighth in state tax analysis

Raymond Keating
Raymond Keating

Colorado continues to rank among the top 10 states in an annual analysis of the cost of tax systems on entrepreneurship and small businesses.

Colorado moved up a spot to eighth in the 2015 Small Business Tax Index prepared by the Small Business & Entrepreneurship Council.

The council, a small business advocacy and research group based in Washington, D.C., takes into account 23 tax measures in calculating index scores that can be ranked and compared.

“Capital and labor are more mobile than ever before in history. And entrepreneurs, workers and investment will migrate to where they are treated best,” said Raymond Keating, chief economist for the Small Business & Entrepreneurship Council.

Colorado consistently ranks among the most business-friendly states with its comparatively low tax rates.

With a top rate of 4.63 percent, Colorado assesses the ninth lowest corporate income taxes, 11th lowest corporate capital gains taxes, 16th lowest dividend and interest taxes, 19th lowest personal income taxes and 20th lowest personal capital gains taxes.

Colorado also ranks high for low fuel taxes at 10th for a state tax on diesel of 20.5 cents a gallon and tied for 14th with a state tax on gasoline of 22 cents a gallon.

Colorado tied at 19th for the lowest unemployment tax, 23rd for the lowest state and local sales taxes as a share of personal income and 26th for the lowest state and local property taxes as a share of income.

South Dakota moved up a spot to claim first place in the 2015 Small Business Tax Index, followed by Nevada, Texas, Wyoming and Washington. Florida, Alabama, Ohio and Alaska joined Colorado in the top 10.

Many of the top-ranked states assess no corporate or personal income taxes.

California remained dead last in the 2015 index, followed by New Jersey, Minnesota, Hawaii, Iowa and New York. Maine, Vermont, Oregon, Connecticut and Nebraska round out the bottom 10.

“When it comes to state and local taxes — as well as levies at the federal level — the direction that policy should be pointed in is clear,” Keating said. “Keep the overall tax burden low. Preferably, do no tax income at all. In the end, if the tax burden is light on economic risk taking, then that will be good news for entrepreneurship, businesses, investment, economic growth and job creation in each state.”