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.
By Cathy McKitrick, The Salt Lake Tribune, March 12, 2012
Utah 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
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
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
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
“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
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
“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
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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