Utah’s corporate tax burden rated light, but does it matter?

Levies:  Study says rates are vital to companies, but others say some factors even more key.


Corporate TaxesUtah ranks favorably in a new study that compares the total tax burden levied on old and new corporations across all 50 states.

The 200-page “Location Matters” places Utah sixth from the top in terms of lightest tax burden for mature firms (10 years old and up) and 10th overall for newly established firms that qualify for incentives.

Its promoters say the research will be an invaluable tool for companies, but others wonder whether the numbers tell the whole story.

Compiled by the Washington, D.C.-based Tax Foundation and KPMG LLP, a global audit and tax firm, the study uses seven hypothetical firm models — corporate headquarters, research and development facilities, retail stores, call centers, distribution centers, capital-intensive manufacturing and labor-intensive manufacturing.

Current Taxes factored into the total rate include corporate income, property, sales, unemployment insurance, capital stock, inventory and gross receipts. For new firms, incentives include new job credits, investment credits, research and development credits, payroll and withholding tax rebates, and property tax abatements.

In a recent conference call, Tax Foundation president Scott Hodge described the study as “one of the most extensive comparisons of real-world corporate tax costs that’s ever been undertaken.”

Highs and lows  “Paying corporate taxes is a lot like buying cars,” Hodge said. “Everyone seems to pay a different price.” However, he believes the state-to-state comparisons will prove useful.

“We’re zeroing in on the firm-level or bottom-line question that we often get from business owners: How much will my company pay in taxes?”

According to the study, Wyoming had the lowest overall tax burden for mature firms, while Pennsylvania had the highest. For new firms, Nebraska had the lightest hit, while Hawaii had the heaviest.

Utah enjoys a relatively low 5 percent corporate income tax rate, but five states — including neighbors Nevada and Wyoming — levy no corporate income tax.

What do the numbers really say? Bob Springmeyer, a principal with the Salt Lake City-based consulting firm Bonneville Research, said the study confines itself to a narrow perspective.

“Wyoming comes out on top because it has no corporate income tax and its other taxes are low. They get all their money from oil, gas and coal. But you don’t find businesses wanting to locate there.”

When Utah faced fierce competition in 2010 to land the contract for the National Security Agency data center at Camp Williams, its favorable energy costs, Internet infrastructure, vibrant software industry and proximity to the Salt Lake City International Airport won the day, not its tax appeal, he argued.

Springmeyer said there was another factor. “Utah ranks low in terms of wages. You can hire good, hardworking, well-educated, dependable people here for less than in most places.”

How much do taxes matter?: The study reinforces that Utah knows how to “keep government out of the wallet of business,” said Christopher Conabee, managing director for corporate recruitment in the Governor’s Office of Economic Development (GOED).

Conabee believes that Utah’s post-performance incentives pose less risk than up-front financial enticements offered elsewhere. Companies recently tapping the state’s incentives include IM Flash Technologies, eBay, Adobe, Procter & Gamble and Goldman Sachs.

Adobe’s website touts its Orem location as a place where employees enjoy diverse seasons, landscapes and recreational opportunities that make it “possible to mountain bike, golf, water ski, and snowmobile — all in one day.”

“When you look at Utah’s total package, that’s why we continue to have great business growth,” Conabee said.

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