Taxes play a role in corporate and household location decisions, but they get way too much credit.
Here’s how the Tax Foundation’s rankings stack up against other economic indicators:
Taxes = Tax Foundation’s overall index rank, 1 = best
GDP Growth = Real GDP change, 2009-2010
Job Growth = Total nonfarm employment change, December 2010-December 2011
Unemployment = Unemployment rate, December 2011
Income = Median household income, 2010
North Dakota ranked 29th in tax burden, but was first in GDP growth and job growth, and had the lowest unemployment rate. Not bad for a tax climate that ranks in the bottom half of all states.
The Tax Foundation tagged New Jersey with the worst tax climate in the U.S. However, New Jersey came in a respectable 24th on GDP growth, and had the second highest median household income. Apparently not all high income households are packing up and moving to reportedly lower cost states like Texas, despite some claims.
For the wonk-minded, data, rankings, and correlation table linked here (Excel).
Sources: Tax Foundation, BEA, BLS, Telestrian