Louisiana offers some of the lowest state-and-local tax burdens in the nation for most categories of new firms, according to a 50-state analysis conducted by the Tax Foundation and KPMG. The study, Location Matters: A Comparative Analysis of State Tax Costs on Business, examines the impact of business taxes on new and mature firms. The study developed an objective measure of the tax costs in all 50 states for model corporations.
A number of think tanks, research groups and media outlets have tackled tax competitiveness analysis, but the Tax Foundation and KPMG note that previous efforts failed to capture actual state business tax burdens, for a variety of reasons. For example, there is much more to the calculation of business tax burdens than tax types and tax rates, because apportionment methods, deductions and credits can significantly impact the actual tax burdens that businesses face in a state.
Studies comparing the value of tax incentives can give the wrong impression that all businesses in a state receive the incentives. Some studies model tax structures and measure the state’s tax code relative to that model. This can be a useful tool, but it fails to address the bottom line of how much a company will pay in taxes.
Individual firms considering an expansion frequently calculate their tax bills in various states, but these calculations are not often released publicly and are usually confined to a small number of states.
To develop a study that would fill the gap, the Tax Foundation and KPMG released an apples-to-apples comparison. Tax Foundation economists designed seven model firms, and KPMG modeling experts calculated each firm’s tax bill in each state.
Location Matters accounts for all business taxes: corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes and gross receipts taxes. Additionally, each firm was modeled twice in each state: once as a new firm eligible for tax incentives and once as a mature firm not eligible for such incentives.