2021 State Business Tax Climate Index: Bring Me the Usual Suspects!

Every year the Tax Foundation publishes its State Business Tax Climate Index. As they state, they look at how each state taxes, not on the how much. Per usual, the names at the top and the bottom haven’t changed much.

The top ten states are:

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Montana
  6. New Hampshire
  7. Nevada
  8. Utah
  9. Indiana
  10. North Carolina

The bottom ten states:

41. Alabama
42. Louisiana
43. Vermont
44. Maryland
45. Arkansas
46. Minnesota
47. Connecticut
48. New York
49. California
50. New Jersey

This is what the Tax Foundation states about the bottom ten:

The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the second highest-rate corporate and individual income taxes in the country and a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.

I deliberately waited until election day to make this post. Why? Because some states have ballot measures today that will impact their rankings. For example, Californians will vote on whether to have a “split-roll” property tax, where business properties would be assessed annually based on current value rather than only when a property is sold. California today ranks 14th in property tax; if this measure passes, the ranking will fall dramatically. Illinois votes today on changing their personal income tax from a flat-rate tax to a progressive system.

Nevada, my state, ranks seventh. It’s not that every tax is great in Nevada (we have a poor sales tax system and unemployment insurance taxes); however, we lack income taxes. (We do have a gross receipts tax, called the Commerce Tax, that large businesses must pay.)

Some states, like Utah and Indiana, have most taxes but they administer them neutrally, simply, and with relatively low rates. Contrast that with California, which has an awful income tax system, high rates, and ridiculous regulations.

Below is a map (from the Tax Foundation) of the United States with the rankings of each state. If you’re considering locating a business, it makes sense to look at taxes (and other factors, too); the Tax Foundation’s annual guide is a tremendous resource.

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