About Maine’s Business Tax Climate Index Ranking

SAW a short piece in the PPH about the Tax Foundation’s latest State Business Tax Climate Index which showed that Maine dropped from 28th to 33rd.

I don’t have a lot to say about the index because there’s not a lot to be said about it.  For instance, Wyoming ranks first on the SBTCI, while New York comes in at 49th . . . up one spot from last year.  If business taxes are suppose to be a great indicator of business activity, as one might infer from the SBTCI, then I am utterly confused by the following:

I have nothing to add than what’s be said already by people better equipped to speak on the topic than me.

Peter Fisher, in a 2013 paper examining the SBTCI and other similar business indexes:

For all these reasons, we question whether the entire enterprise of measuring an overall business tax climate for a state can be valid or useful.  State tax systems are complex, and interact in complex with the asset structure and geographic characteristics of firms.

Jake Palley and Geoffrey King in a 2008 paper examining the SBTCI:

In conclusion, while the SBTCI may provide some utility in ranking a state’s relative tax climate to another, it is not instructive for policymakers.  Indeed, policymakers should avoid temptation to alter a state’s tax code merely to improve its relative index score in the hopes that a state’s GDP and unemployment will increase in turn.

There’s plenty more on the topic of the SBTCI and other similar indexes.  In short, while it’s a data point, Maine’s policymakers shouldn’t react too strongly to it.


John Haskell

About John Haskell

John graduated from the University of Southern Maine with a degree in Political Science, and from the University of Maine School of Law. He has worked in both the public and private sectors, and currently, works with a small business services company in the Mid-Coast area.