Taxes: Is Less More?

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1. Missouri 6. New Hampshire

2. Florida 7. Alabama

3. Arkansas 8. Ohio

4. Indiana 9. Idaho

5. Tennessee 10. Texas

If taxes were the bane of business they are reputed to be, then the 10 states with the lowest taxes, listed above, would appear as the top 10 of the whole pageant. As it happens, only 2 do, New Hampshire and Texas -- which reflects the great significance of other variables in creating a hospitable business environment: capital resources, cost and quality of labor, and the like.

It is also true that elected officials nowadays seem ever more sensitive to the view that taxes are a price they will pay, in lost elections, for failure to serve the economic growth of their states. Thus, while New Hampshire's government boasts of its low taxes, Washington's, on the opposite side of the continent, may be heard crowing over its higher taxes. Each, however, plausibly argues that the trade-offs redound to the benefit of doing business in that particular state -- in the form of increased disposable income, in one case, and in the form of superior state services in the other.

Direct comparisons among the states' tax climates are almost impossible to make. Alaska, for example, has the highest taxes -- $496 per $1,000 of personal income -- but because the state's revenues are extracted almost entirely from big energy companies, most residents pay no state or local taxes at all. Nevertheless, INC.'s survey provides a basis for comparison. Examination of taxation on each $1,000 of personal income reveals that the 10 least-taxing states in the Union ranged a neat $10, from Missouri's $87 to Texas's $97.