Maine solidly in middle in new biz tax comparison

The Tax Foundation this week published a state-by-state comparison of the tax burdens mature and new businesses face across the nation, and Maine came out solidly in the middle in the rankings.

According to the Tax Foundation, which did the study in collaboration with KPMG LLP, an audit, tax and advisory firm, Maine ranked 27th in the nation for overall tax burdens on  mature operations and 20th overall for new operations.

In this particular study, a higher number is better – i.e., the number one ranked state has a much lower burden than the number 50th ranked state.

“Corporate taxes on the state level rarely treat all comers equally, leading to sometimes dramatic disparities in the cost of doing business,” said Tax Foundation president Scott Hodge in a release accompanying the study. “Tax preferences and incentive deals can distort the playing field based on how long a business has been operating, whether it’s a manufacturing or retail operation or whether it’s moved from another state to set up shop.”

The states which ranked best overall for mature firms were led by Wyoming at  number one, followed by South Dakota, Georgia, Nevada, and Ohio. Lowest ranked states included Pennsylvania, which came in dead last at 50, followed by Hawaii, West Virginia, Kansas, and Rhode Island.

The report also looked at the tax burdens on businesses in a variety of sectors. Maine’s results were mixed – in some cases, hitting the top 10 states in low tax burdens for those sectors. It ranked near the bottom in others, and in the middle for yet others.

Among the Maine highlights (remember, higher is better in these rankings):

Maine ranks sixth for the mature call center operations. This firm benefits from the state’s low 5 percent sales tax and apportionment formula that gives it the third-lowest income tax costs for this type of firm.

The same factors help the state rank ninth for the mature R&D operation. This operation has a total effective tax rate (TETR) of 8.4 percent, which is 35 percent below the national average.

Maine ranks ninth for the new retail store, which has a tax burden 23 percent below the national average. Despite facing a high corporate income tax rate, this establishment is helped by a property tax abatement that gives it one of the lower property tax burdens for this firm type. It also has one of the lower sales tax burdens for new retail establishments.
A few lowlights:

The state ranks 45th for the mature capital-intensive manufacturing firm, which has a TETR of 18.2 percent, 44 percent above the national average. The main contributor to this ranking is its 8.93 percent income tax and throwback rule. This operation also has an above-average property tax burden.

The same factors give the state a 41st-place ranking for mature labor-intensive manufacturing. This firm has the second-highest corporate income tax burden in this category.

According to the release, Tax Foundation economists modeled seven hypothetical firms, and KPMG calculated each entity’s tax bill in each state. The study accounts for basically all business taxes and applies major tax incentives applicable by firm type.

“The Location Matters report should provide companies with an easy-to-use reference that will help shape their overall location decisions,” said KPMG Principal W. Hartley Powell of the firm’s Global Location and Expansion Services practice. “The report offers a comprehensive calculation of real-world tax obligations by firm types for all 50 states, making it a useful tool as companies work through the complexities of maintaining existing operations and establishing new operations.”