Ranking Corporate Income Taxes on the 2022 State Business Tax Climate Index

In the coming weeks, we will break down our 2022 State Business Tax Climate Index, released in December, with maps illustrating each of the five major components of the Index: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. Today we look at states’ rankings on the corporate tax component, which accounts for 20.9 percent of each state’s overall rank.

The corporate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. component of our State Business Tax Climate Index measures each state’s principal tax on business activities. Most states levy a corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. on a company’s profits (receipts minus most business expenses, including compensation and the cost of goods sold), while some states levy gross receipts taxes, which allow few or no deductions for a company’s expenses.

Unlike other studies that look solely at tax burdens, the Index measures how well or poorly each state structures its tax system. It is concerned with the how, not the how much, of state revenue, because there are better and worse ways to levy taxes. Our corporate tax component, for example, scores states not just on their corporate tax rates and brackets, but also on how they handle net operating losses, whether they levy gross receipts-style taxes (which are more economically harmful than corporate income taxes), whether businesses can fully expense purchases of machinery and equipment, and whether states index their brackets for inflation, among other factors.

Click here to see an interactive version of states’ corporate tax rankings, and then click on your state for more information about how its tax system compares both regionally and nationally.

Corporate Tax Component of the State Business Tax Climate Index (2019-2022)

State	2019 Rank	2020 Rank	2021 Rank	2022 Rank	Change from 2021 to 2022
Alabama	22	23	23	17	6
Alaska	25	26	26	28	-2
Arizona	16	21	22	23	-1
Arkansas	40	34	34	30	4
California	38	28	28	46	-18
Colorado	6	7	9	6	3
Connecticut	34	27	27	27	0
Delaware	50	50	50	50	0
Florida	11	9	6	7	-1
Georgia	8	6	7	8	-1
Hawaii	12	17	19	19	0
Idaho	28	29	29	29	0
Illinois	37	36	36	42	-6
Indiana	19	11	12	11	1
Iowa	47	48	46	38	8
Kansas	32	35	31	21	10
Kentucky	15	13	15	15	0
Louisiana	35	37	35	34	1
Maine	33	38	37	35	2
Maryland	26	32	33	33	0
Massachusetts	39	39	38	36	2
Michigan	13	18	20	20	0
Minnesota	44	46	45	45	0
Mississippi	14	10	13	13	0
Missouri	4	3	3	3	0
Montana	9	20	21	22	-1
Nebraska	29	31	32	32	0
Nevada	21	25	25	25	0
New Hampshire	46	43	41	41	0
New Jersey	49	49	48	48	0
New Mexico	23	22	11	12	-1
New York	18	14	16	24	-8
North Carolina	3	4	4	4	0
North Dakota	17	19	8	9	-1
Ohio	43	42	42	40	2
Oklahoma	20	8	10	10	0
Oregon	30	33	49	49	0
Pennsylvania	45	44	43	44	-1
Rhode Island	36	40	39	37	2
South Carolina	5	5	5	5	0
South Dakota	1	1	1	1	0
Tennessee	27	24	24	26	-2
Texas	48	47	47	47	0
Utah	7	12	14	14	0
Vermont	41	45	44	43	1
Virginia	10	15	17	16	1
Washington	42	41	40	39	1
West Virginia	24	16	18	18	0
Wisconsin	31	30	30	31	-1
Wyoming	1	1	1	1	0
District of Columbia	24	24	24	25	-1
Note: A rank of 1 is best, 50 is worst. All scores are for fiscal years. DC’s score and rank do not affect other states. Source: Tax Foundation.

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