The anti-government Tax Foundation has updated its State Business Tax Climate Index for 2006. And, once again, the Foundation’s ranking scheme rates Ohio poorly. The Tax Foundation’s index suffers from a number of problems. First, the index places undue weight on taxes as a determinant of business location decisions. Businesses locate in places where there are markets for their products, with good infrastructure, and a good work force. Quality health care and education systems contributing to a good quality of life also attract businesses. Second, the index places a premium on tax rates and down plays taxes paid. For instance, Ohio has medium to high tax rates compared to other states. However, Ohio’s tax burden is lower than our rates would lead one to believe since the state’s narrow tax bases result in lower collections. In fact, their measure bears very little relation to actual corporate taxes paid. Third, the Tax Foundation’s analysis begins on the assumption that difference in taxes from one state to the next can attract businesses. In reality, state-by-state tax burdens are becoming more alike rather than different. In other words, there is less in the tax code to compete over from state to state. A final flawed assumption is that higher levels of taxation retard income and economic growth in a state when in fact higher levels of taxation are associated with stronger economies and lower levels of taxation are associated with weak economies. This is most likely because leaders in these states have recognized that economic progress comes with effective public investments.