The Tax Foundation today released its annual study of state business tax climates. As usual, Washington ranks in the top 10 best. We were 6th this year, 7th last year, and 8th the year before. As we wrote last year, regarding the 2012 rankings, the TF methodology favors states without an income tax.

The Tax Foundation acknowledges this feature (some may call it a bug) of the index.

The absence of a major tax is a dominant factor in vaulting many of these ten states to the top of the rankings. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax…

The lesson is simple: a state that raises sufficient revenue without one of the major taxes will, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal.

Leaving aside the question of whether the top states raise “sufficient revenue” as something for their voters to decide, the TF logic is defensible and the report defends it, including a section that serves as a good primer on how taxes play into business decisions. (As a bonus, today TF responded to criticism from a group in New Jersey, providing a nice map of interstate migration in 2009, showing a general tendency for growth in states that perform well on the tax index.)

We’ve pointed out before that general indexes like this provide only general guidance, because businesses respond differently to different tax structures (not to mention the issue of tax incentives). TF did a great job illustrating the differences in Location Matters, a study published last March. In this column I dscuss some of the differences among the business tax climate index, the location study, and another measure of business tax burdens published by the Council on State Taxation.

Just as there’s no single measure of “best business climate,” opinions will differ on “best business tax climate.” From conversations with business owners here, I know many will disagree that Washington is among the best. Many of them also believe the absence of an income tax is a key strength in our system.

This latest report provides good information, with a laudable degree of transparency and a thorough review of the economic literature. It’s a valuable contribution. And not the last word.