Feb
5
2012 State Business Tax Climate Index
2012 State Business Tax Climate Index
by Mark Robyn
Tax Foundation Background Paper No. 62
The Tax Foundation presents the 2012 version of the State Business Tax Climate Index to enable business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.
The 10 best states in this year’s Index are:
1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. New Hampshire
7. Washington
8. Montana
9. Texas
10. Utah
It is obvious that the absence of a major tax is a dominant factor in vaulting many of these 10 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. Wyoming, Nevada and South Dakota have no corporate or individual income tax; Alaska & New Hampshire have no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no 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.
The 10 lowest ranked, or worst, states in this year’s Index are:
41. Iowa
42. Maryland
43. Wisconsin
44. North Carolina
45. Minnesota
46. Rhode Island
47. Vermont
48. California
49. New York
50. New Jersey
New Jersey scores at the bottom by having the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax. Rhode Island has improved from 47th to 46th by implementing a modest individual income tax reform, but still has the worst unemployment tax system and fifth-worst property tax system. Maryland improved from 44th to 42nd this year due mostly to the expiration of the state’s “millionaire’s tax” on high-income earners. The states in the bottom 10 suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
Illinois moved most dramatically in its Index rank over the past year, falling twelve places (from 16th place in 2011 to 28th place in 2012).
The 2012 Index represents the tax climate of each state as of July 1, 2011, the first day of the standard 2012 state fiscal year.
Table 1. 2012 State Business Tax Climate Index Ranks and Component Tax Ranks
Statistics from http://www.taxfoundation.org/ 2-5-12
