How U.S. Cities Stack Up on Business Taxes

Relocating a business? A new survey looks at nearly 400 U.S. cities, ranking them based on how much local companies pay in taxes.

By Laura Kennedy, Researcher-Reporter, the Kiplinger letters

July 26, 2006

The city with the highest taxes on businesses is…Philadelphia,
according to the 2006 Kosmont-Rose Institute Cost of Doing Business Survey. Ranking just behind the City of Brotherly Love are the following cities with populations of 250,000 or more: Cincinnati, Ohio, New York, San Francisco and Nashville-Davidson, Tenn.

The least-expensive city with 250,000 or more people? Las Vegas.
Next are Colorado Springs and Aurora, Colo., Fort Worth, Texas, and Seattle, the report says.

The survey of 398 American cities provides a handy tool for comparison based on several state and local tax rates. For firms looking to set up shop or move, tax rates can be a tiebreaker when choosing among locations that are otherwise on par for labor, real estate, transportation and energy costs as well as quality of life and other factors.

Although the California-based survey includes cities in 49 states plus Washington, D.C., it is heavily weighted toward cities in California: 250 on the list are in the Golden State. The report was prepared by Kosmont Companies of Encino, Calif., and the Rose Institute of State and Local Government at Claremont McKenna College in Claremont, Calif. Kosmont is a real estate consulting and development firm that started the survey for California clients 12 years ago and is adding new cities every year.

The cost ratings are based largely on business taxes, sales taxes, property taxes, electric and telephone taxes and state corporate income taxes. (Business taxes include gross receipts and payroll taxes for firms that typically occupy office, retail and industrial space as well as charges for nonresidential and residential landlords.) The tax categories in the survey affect companies of all sizes; that's why they were picked, says Larry Kosmont, CEO and president of Kosmont Companies.

In an explanation of the methodology used to compile the city rankings, the report points out that a community with no business or utility taxes can earn a high-cost rating if it has exceptionally high property taxes or income taxes. Likewise, a community with high business taxes might earn a low-cost rating if income, property or utility taxes are low or absent. Philadelphia's top ranking, for example, is pumped up by the city's very high business-licensing fees and income taxes rather than high fees in every category, Kosmont notes. The report stresses that each company should individually calculate how various community tax rates will affect it.

The complete report is available on CD for $600. An executive summary sent by e-mail is $75. Details on individual cities can be purchased à la carte: $40 per city for reports on up to four cities; $35 per report for five to nine cities; and $30 per report for 10 or more cities. To order, click here.

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