Best and worst states for business

The Tax Foundation recently released its rankings on the business-friendliness of the tax system of America’s 50 constituent states.
The foundation’s State Business Tax Climate Index, now in its 8th edition, accounts for dozens of state tax provisions, creating a single easy-to-use score that measures each state against the tax climates of every other state. Each state’s ranking is therefore relative to the actual tax policies in place around the country, not a measurement against a theoretical “perfect” system.

The Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While some similar studies focus on the total amount residents pay in taxes each year, the Index focuses on how the elements of a state tax system enhance or harm the competitiveness of a state’s business environment.

Tax Foundation economist Mark Robyn explains: “Even in our global economy, a state’s stiffest and most direct competition often comes from other states. State lawmakers need to be aware of how their states’ business climates match up to their immediate neighbors and to other states in their region.”
The best states in this year’s index do not have one or more of the major taxes, and thus do not have the associated complexity and distortions. In contrast, the worst states generally have complex, non-neutral taxes with comparatively high rates.

10 best states for business:

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

10 worst or least business-friendly states:

41. Iowa
42. Maryland
43. Wisconsin
44. North Carolina
45. Minnesota
46. Rhode Island
47. Vermont
48. California
49. New York
50. New Jersey

Tax Foundation Background Paper No. 62, “2012 State Business Tax Climate Index” by Mark Robyn is available online.


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I’m surprised WA State is in top ten, given the B&O (tax on gross receipts) tax and the massive taxes implemented in 2010. Ha, that tells you how bad off other states must be if we still have high business taxes yet come in at number 7.