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27 August 2013

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.

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