2012 State Business Tax Climate Index Released
January 25, 2012
Each year we produce the Index to enable business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While total taxes paid is a relevant measure, another is how the elements of a state tax system enhance or harm the competitiveness of a state’s business environment. The Index looks at over 100 variables in individual income tax, corporate income tax, sales tax, unemployment insurance tax, and property tax to reduce these many complex considerations to an easy-to-use ranking.
The 10 best states in this year’s 2012 Index are Wyoming, South Dakota, Nevada, Alaska, Florida, New Hampshire, Washington, Montana, Texas, and Utah. Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.
The 10 lowest ranked, or worst, states in the 2012 Index are Iowa, Maryland, Wisconsin, North Carolina, Minnesota, Rhode Island, Vermont, California, New York, and New Jersey. While the bottom three states remained steady compared with 2011, Rhode Island improved modestly by implementing a revenue-neutral income tax reform. The states in the bottom ten generally have complex, non-neutral taxes with comparatively high rates.
Illinois moved most dramatically in its Index rank over the past year, falling twelve places after a significant income and corporate tax increase.
We hope that providing this information to you helps gauge how your tax system compares and provides a roadmap for improving the business tax climate. In 2011, the Index report was downloaded 487,000 times and referenced in 320 major media articles and 4 State of the State addresses. The rankings are used in other organization’s rankings as the tax component, and recent academic evidence found correlation between Index component ranking and state wage and economic growth.
The 2012 Index reflects state tax systems as they stood on July 1, 2011, the start of the 2012 Fiscal Year in most states. Read the 56-page Index report and the results at http://www.taxfoundation.org/legacy/show/22658.html. (Download a PDF version here.)
|2012 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|
| Note: Rankings do not average across to total. States without a given tax rank equally as number 1.
Source: Tax Foundation
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