Ranking Property Taxes on the 2023 State Business Tax Climate Index

Today’s map shows states’ rankings on the property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. component of our 2023 State Business Tax Climate Index. The Index’s property tax component evaluates state and local taxes on real and personal property, net worth, and asset transfers. The property tax component accounts for 15 percent of each state’s overall Index score.

Property taxes matter to businesses for several reasons. First, businesses own a significant amount of real property, and 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. rates on commercial property are often higher than the rates on comparable residential property. Many states and localities also levy taxes not only on the land and buildings a business owns but also on tangible property, such as machinery, equipment, and office furniture, as well as intangible property like patents and trademarks. Across the nation, property taxes impose one of the most substantial state and local tax burdens that businesses face. In fiscal year 2021, taxes on real, personal, and utility property accounted for almost 39 percent of all taxes paid by businesses to state and local governments, according to the Council on State Taxation.

Although taxes on real property tend to be unpopular with the public, a well-structured real property tax generally conforms to the benefit principle (the idea in public finance that taxes paid should relate to benefits received) and is more transparent than most other taxes.

Taxes on intangible property, wealth, and asset transfers, on the other hand, are harmful and distortive. States that levy such taxes—including capital stock taxes; inventory and intangible property taxes; and estate, inheritance, gift, and real estate transfer taxes—are less economically attractive, as they create disincentives for investment and encourage businesses to make choices based on the tax code that they would not make otherwise. Businesses with valuable trademarks may seek to avoid headquartering in states with intangible property taxes, and shipping and distribution networks might be shaped by the presence or absence of inventory taxes.

States are in a better position to attract business investment when they maintain competitive real property tax rates and avoid harmful taxes on tangible personal property, intangible property, wealth, and asset transfers. This year, the states with the best scores on the property tax component are Indiana, New Mexico, Idaho, Delaware, and Nevada. States with the worst scores on this component are Connecticut, New York, Vermont, Maine, Massachusetts, and New Jersey, plus the District of Columbia.

To gauge whether your state’s property tax structure has become more or less competitive in recent years, see the following table. (Methodological changes are backcast to prior years to facilitate comparability.)

How Does Your State Rank on Property Tax Structre?

Property Tax Component of the State Business Tax Climate Index (2020–2023)
State	2020 Rank	2021 Rank	2022 Rank	2023 Rank	Change from 2022 to 2023
Alabama	19	21	20	18	2
Alaska	25	25	26	26	0
Arizona	11	10	11	11	0
Arkansas	27	28	29	27	2
California	15	14	14	19	-5
Colorado	33	33	34	36	-2
Connecticut	50	50	50	50	0
Delaware	4	4	4	4	0
Florida	12	12	12	12	0
Georgia	31	27	27	28	-1
Hawaii	28	30	31	32	-1
Idaho	3	3	3	3	0
Illinois	44	45	45	44	1
Indiana	2	2	1	2	-1
Iowa	38	38	39	40	-1
Kansas	18	19	19	17	2
Kentucky	23	24	24	24	0
Louisiana	29	26	25	23	2
Maine	40	40	41	47	-6
Maryland	41	43	43	42	1
Massachusetts	45	46	46	46	0
Michigan	26	22	23	25	-2
Minnesota	32	32	32	31	1
Mississippi	37	37	38	37	1
Missouri	9	8	7	7	0
Montana	21	20	22	21	1
Nebraska	39	41	40	39	1
Nevada	6	5	5	5	0
New Hampshire	46	47	47	43	4
New Jersey	47	44	44	45	-1
New Mexico	1	1	2	1	1
New York	48	49	49	49	0
North Carolina	13	13	13	13	0
North Dakota	7	11	10	9	1
Ohio	5	6	6	6	0
Oklahoma	30	31	30	30	0
Oregon	20	16	17	20	-3
Pennsylvania	16	15	15	16	-1
Rhode Island	42	42	42	41	1
South Carolina	35	35	36	35	1
South Dakota	14	23	18	14	4
Tennessee	34	34	33	33	0
Texas	36	36	37	38	-1
Utah	8	7	8	8	0
Vermont	49	48	48	48	0
Virginia	24	29	28	29	-1
Washington	17	18	21	22	-1
West Virginia	10	9	9	10	-1
Wisconsin	22	17	16	15	1
Wyoming	43	39	35	34	1
District of Columbia	48	49	49	49	0
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.

To learn more about how we determined these rankings, read our full methodology.

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