PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Largest Jobs Gains in the States: Taxes Matter

By at 25 January, 2023, 10:29 am

SMALL BUSINESS INSIDER

by Raymond J. Keating –

The latest “State Employment and Unemployment” report from the U.S. Bureau of Labor Statistics pointed to a no-growth payroll picture in 49 states in December 2022 compared to the previous month. One state – West Virginia – experienced a statistically significant decline (-1.4 percent) in employment.

However, there was growth in 42 states in terms of nonfarm payrolls in December 2022 versus a year earlier, while 8 states were essentially unchanged.

Tax Friendliness Matters

Here’s an interesting fact about the top four growth states – three of the four rank among the nation’s most tax-friendly states.

Texas led the nation. Nonfarm employment grew 5.0 percent from December 2021 to December 2022. The Lone Star State, of course, imposes no individual or corporate income and capital gains taxes.

Florida ranked second best. The Sunshine state posted a nonfarm employment gain of 4.8 percent. Florida imposes no individual income and capital gains taxes.

Oregon came in third best. Jobs gains were up 4.2 percent. Oregon is the odd man out, as it imposes a heavy tax burden.

North Carolina came in a number four. Nonfarm jobs increased 4.1 percent from December 2021 to December 2022. The Tar Heel State has made dramatic positive tax changes in recent times. For example, in 2013, the state imposed a top individual income and capital gains tax rate of 7.75 percent. That rate stands at 4.75 percent in 2023.  Also, in 2013, the state’s corporate income tax rate came in at 6.9 percent, and it now stands at 2.5 percent.

Taxes aren’t the only factor determining where entrepreneurs and businesses set up shop and create jobs, but taxes certainly matter a good deal. State lawmakers that recognize this fact and act on it send clear signals to entrepreneurs, businesses, investors and workers that their state recognizes the central importance of entrepreneurship, business and investment to economic and employment growth.

Now if we could only get federal lawmakers to think like state lawmakers in Texas, Florida and North Carolina when it comes to taxes.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

 

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