Soaking Smaller Businesses under Mandated Workers Compensation Insurance

My small laboratory operation with three employees, counting myself, is forced to pay $69 a year for Terrorism Insurance to The Hartford as part of our mandated Workers Compensation and Employers Liability Insurance.  This is a ridiculous charge for insurance for a small company located in Columbia, Maryland.  We are hardly a target for terrorists.

What is more important yet, my actual payroll was multiplied by a factor of 1.74 to arrive at the payroll basis they use for charging for all aspects of the workers compensation insurance.  It turns out that the state of Maryland requires insurers offering workers compensation insurance to treat all officers of the company as having a minimum salary even if they actually have a smaller salary.  This is a clearly discriminatory act against very small companies and is of the nature of piling onto them when times are hard.  What I would give to be able to pay myself and my partner what the state claims we must have for our insurance premium basis!

Of course, I would not be surprised if the state of Maryland does not have this discriminatory requirement in part at the insistence of the insurers.  It is a curious thing that the upper salary used for the insurance basis is also set by the state of Maryland.  An executive making more than $197,600 is only counted as $197,600 to calculate the premium.  Chalk up another advantage for larger companies to make it a bit harder for smaller companies to compete.

This piling on process is similar to the state raising the rate for unemployment insurance on a company that has kept all of its employees while other companies are letting theirs go.  When unemployment claims go up, our rate goes up to cover the state's increased costs.  No one ever worries about our increased costs in hard times.  This never-ending Great Socialist Recession sure is a one-of-a-kind such hard time.

Governments cause horrible, long-lasting recessions and then they increase taxes on those companies trying to survive the chaos and destruction caused by governments.  Of course, if you are a big company or you have pull with government, then you can gather up subsidies,
be the beneficiary of mandates, and earn exemptions.

Business Tax Climate Rankings by State

The Tax Foundation has produced the 2013 report on the tax climate rankings of the states as of July 2012.  The ten states with the most favorable business tax climate and the ten with the worst are color-coded in the map below with their rankings given.  The white states are the best.

2013 State Business Tax Climate Index Ranks and Component Tax Ranks
State	Overall Rank	Corporate Tax Rank	Individual Income Tax Rank	Sales Tax Rank	Unemployment Insurance Tax Rank	Property Tax Rank
Alabama	21	17	18	37	13	8
Alaska	4	27	1	5	28	13
Arizona	25	24	17	50	1	5
Arkansas	33	37	28	41	19	19
California	48	45	49	40	16	17
Colorado	18	20	16	44	39	9
Connecticut	40	35	31	30	31	50
Delaware	14	50	29	2	3	14
Florida	5	13	1	18	10	25
Georgia	34	9	40	13	25	30
Hawaii	37	4	41	31	30	15
Idaho	20	19	23	23	47	2
Illinois	29	47	13	34	43	44
Indiana	11	28	10	11	11	11
Iowa	42	49	33	24	34	37
Kansas	26	36	21	32	9	28
Kentucky	24	26	26	9	48	18
Louisiana	32	18	25	49	4	23
Maine	30	41	27	10	32	39
Maryland	41	15	45	8	46	40
Massachusetts	22	33	15	17	49	47
Michigan	12	7	11	7	44	31
Minnesota	45	44	44	35	40	26
Mississippi	17	11	19	28	7	29
Missouri	16	8	24	27	6	6
Montana	8	16	20	3	21	7
Nebraska	31	34	30	26	8	38
Nevada	3	1	1	42	41	16
New Hampshire	7	48	9	1	42	43
New Jersey	49	40	48	46	24	49
New Mexico	38	39	34	45	15	1
New York	50	23	50	38	45	45
North Carolina	44	29	43	47	5	36
North Dakota	28	21	35	16	17	4
Ohio	39	22	42	29	12	34
Oklahoma	35	12	36	39	2	12
Oregon	13	31	32	4	37	10
Pennsylvania	19	46	12	20	36	42
Rhode Island	46	42	37	25	50	46
South Carolina	36	10	39	21	33	21
South Dakota	2	1	1	33	35	20
Tennessee	15	14	8	43	26	41
Texas	9	38	7	36	14	32
Utah	10	5	14	22	20	3
Vermont	47	43	47	14	22	48
Virginia	27	6	38	6	38	27
Washington	6	30	1	48	18	22
West Virginia	23	25	22	19	27	24
Wisconsin	43	32	46	15	23	33
Wyoming	1	1	1	12	29	35
Dist. of Columbia	44	35	36	42	48	24
Note: A rank of 1 is more favorable for business than a rank of 50. Rankings do not average to total. States without a tax rank equally as 1. D.C. score and rank do not affect other states. Report shows tax systems as of July 1, 2012 (the beginning of Fiscal Year 2013).

The scores of the ten best business tax climate states are:

1)  Wyoming, 7.66
2)  South Dakota, 7.56
3)  Nevada, 7.45
4)  Alaska, 7.34
5)  Florida, 6.88
6)  Washington, 6.38
7)  New Hampshire, 6.25
8)  Montana, 6.22
9)  Texas, 6.09
10) Utah, 6.04

There is not much difference between the top four ranked states.  There also is not much difference in those ranked from 6 through 10.

The ignominious final ten states are:

50) New York, 3.40
49) New Jersey, 3.40
48) California, 3.67
47) Vermont, 4.08
46) Rhode Island, 4.12
45) Minnesota, 4.18
44) North Carolina, 4.21
43) Wisconsin, 4.37
42) Iowa, 4.47
41) Maryland, 4.47
40) Connecticut, 4.47

The three worst states, New York, New Jersey, and California really stand out from the rest with their very low scores.  The remainder of the worst ten states all have close scores between 4.08 and 4.47.

The middle states of Arizona with a score of 5.13 and Kansas with a score of 5.10 lag the lowest state of the top ten more than they exceed the best state of the bottom ten states.  There are more states with high tax policies than there are with low tax policies.  Indeed, the states ranked 20 (Idaho) through 30 (Maine) are only separated by scores differing by 0.27.  All of these states are closer to New York in score than they are to Wyoming.  The average of the Wyoming and New York scores is 5.53 and the state having the score closest to this is Missouri with a score of 5.46 and a rank of 16.  So, the top few states in the rankings are very much better than the average state.  Even in the top ten the differential score between #1 and #10 is much greater than that between #50 and #40.

I live in the beautiful state of Maryland with a really awful state government.  Its business tax climate rank of 41 makes it a terror for businesses.  Much of my family is in Oklahoma with a poor ranking of 35.  One sister owns a business in North Carolina, which actually worse than Maryland!  Another sister tries to do business in Kansas with a ranking of 26, which as I mentioned puts it much closer to New York than to Wyoming.

I hear that parts of Wyoming are beautiful.  I will have to do some business scouting there and see if there is a suitable way to do business as a materials laboratory there.  After all, almost all of our customers send us materials to analyze by Fed Ex and UPS anyway.  My laboratory could be anywhere.