Colorado ranks ninth in small business tax analysis

Raymond Keating
Raymond Keating

Colorado continues to rank among the top 10 states in an annual analysis of how tax systems affect small businesses and entrepreneurs.

Colorado slipped one spot, but still ranked ninth in the 2016 Small Business Tax Index calculated by the Small Business & Entrepreneurship Council. Colorado assesses comparatively low personal and corporate income tax rates, while falling in about the middle for property and sales taxes.

“In the end, if the burden is light on economic risk taking, then that will be good news for entrepreneurship, small business growth, investment, economic and income growth and job creation in each state,” said Raymond Keating, chief economist for the Small Business & Entrepreneurship Council.

The council, a small business advocacy and research group in Washington, D.C., takes into account 25 tax measures in calculating index scores that can be ranked and compared.

With a top rate of 4.63 percent, Colorado assesses the 10th lowest corporate income taxes, 12th lowest corporate capital gains taxes, 16th lowest dividend and interest taxes, 19th lowest personal income taxes and 21st lowest individual capital gains taxes.

Colorado also imposes comparatively low fuel taxes, ranking 10th for a state tax on diesel at 20.5 cents a gallon and 14th for a state tax on gasoline at 22 cents a gallon.

Colorado ranked 16th for the lowest unemployment tax, 24th for the lowest state and local property taxes as a share of income and 26th for the lowest state and local sales taxes as a share of personal income.

South Dakota remained in first place in the 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 2016 index, followed by New Jersey, Minnesota, Iowa, Hawaii and New York. Vermont, Oregon, Maine, Connecticut and Nebraska rounded out the bottom 10.

Keating said 11 states improved their tax climates since last year by reducing personal or corporate tax rates or eliminating estate taxes. “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. Keep the overall tax burden low,” he said.