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October 24, 2019 2:48pm

Kentucky and Indiana hold steady in new business tax climate rankings

Kentucky and Indiana hold steady in new business tax climate rankings released this week, though analysis of both states underscores the need for constant improvement and unemployment insurance reform.

Every Fall, the nonpartisan Tax Foundation releases its annual Business Tax Climate Index, which analyzes the business tax climates of all 50 states and creates composite scores based on corporate taxes, individual taxes, sales taxes, property taxes, and unemployment insurance taxes. The Tax Foundation’s Index focuses largely on state tax system structures as opposed to revenue generation and collections. States with uncomplex and neutral tax codes with low rates and minimal economic distortions tend to rank highest in the Index. For years, these rankings have served as a reliable guide for businesses, chambers of commerce, policy analysts, and policymakers to gauge the competitiveness of their state’s tax code relative to all 50 states.

GLI has long advocated for comprehensive tax reforms in Kentucky and improvements to Indiana’s tax code. While employers consider many factors in making consequential business decisions—workforce, infrastructure, supply chains, quality of life—we know that a state’s tax structure can often have an outsized influence. Ensuring the competitiveness of the tax systems in Greater Louisville is one of GLI’s top priorities.

Kentucky’s Business Tax Climate Ranking

The Tax Foundation gave Kentucky an overall ranking of 24th, down just one notch from 23rd in 2019 but still up significantly from 33rd in 2018. Thanks to hard-won reforms supported by GLI in the past two legislative sessions, Kentucky has been gradually climbing the competitiveness ladder, moving from the bottom 50 percent of states to the top 50 percent. Kentucky’s ranking is helped by its flat 5 percent individual and corporate income tax rates. Negatives include an overly complex property tax system and the second-worst unemployment insurance tax system in the nation. Kentucky’s outdated unemployment insurance system is a major drag on the Commonwealth’s competitiveness. These new rankings underscore the need for meaningful structural reforms.

Indiana’s Business Tax Climate Ranking

Indiana continued to hold its coveted spot among the top 10 states for its competitive business tax climate. The Hoosier state has the second-best property tax system in the nation, according to the Tax Foundation. Indiana also received high marks for corporate and individual tax and middling scores for sales taxes and unemployment insurance taxes.

Regional Business Tax Climate Rankings for 2020

  • Illinois: 35
  • Indiana: 10
  • Kentucky: 24
  • Missouri: 14
  • Ohio: 38
  • Tennessee: 18
  • Virginia: 25
  • West Virginia: 23

Read the full report here. See the links below to learn more about tax reform in Kentucky.

Guest Post: Kentucky Tax Reform Part II – What Happened in 2019, and What’s Next for 2020

What You Need to Know about Tax Reform Legislation in #KYGA19

Regional Experts Explain How State Tax Reform Impacts The Business Community

Guest Post: Kentucky Tax Reform – Big Changes For the Business Community