Connecticut’s Total Effective Business Tax Rate

Connecticut is often accused of having tax rates that are too high and thus unfriendly to business.  You’ll hear this criticism from all kinds of sources- newscasters on tv, angry contributors to internet forums, and occasionally even Texas Governor Rick Perry as he strolls through the State trying to lure Connecticutians away from the Northeast.

But we work with hundreds of businesses in Connecticut, on a regular basis, and the outlook is not so grim and taxophobic in our community.  Yes, the national economy is still in a period of recovery, and of course, everyone would prefer to have their taxes lowered, but Connecticut companies continue to thrive in the state and are as happy as ever to set up shop in the Constitution State.

The accounting firm Ernst & Young recently conducted a study in conjunction with the Council on State Taxation (COST) to take an objective look at the dense and dynamic world of state and local taxation across the United States.  Their results confirm and quantify something we’ve long understood: Connecticut’s infrastructure, benefits, and potential for profitability drastically lower the explicit tax rate to a substantially lower effective tax rate.

How low?  Connecticut businesses pay the second lowest percentage of their gross state product back to the state in taxes.  We rank behind only North Carolina, and by only a fraction of a percentage point.

This image, from the review’s Total State and Local Business Taxes findings, shows the nation in terms of the total effective tax rate that businesses are charged on a state and local level.  Connecticut is in the very lowest category.

Image via EY and COST.

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