New Release: 2016 State Business Tax Climate Index
November 17, 2015
This morning we released the 2016 State Business Tax Climate Index!
We compile the Index each year to rank the 50 U.S. states across more than 100 variables in the areas of corporate income tax, individual income tax, sales tax, property tax, and unemployment insurance tax. The Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how states structure tax systems and provide a roadmap for improvement.
- The top ten states are Wyoming, South Dakota, Alaska, Florida, Nevada, Montana, New Hampshire, Indiana, Utah, and Texas. The bottom ten states are Maryland, Ohio, Wisconsin, Connecticut, Rhode Island, Vermont, Minnesota, California, New York, and New Jersey.
- Illinois improves from 31st to 23rd due to the sunset of higher corporate and individual income taxes enacted in 2011.
- Kansas drops from 21st to 22nd after implementing a sales tax increase, in large part due to budget gap and stability issues caused by the state’s exemption of pass-through business income in 2012.
- Nevada drops from 3rd to 5th after enacting a new modified gross receipts tax, the Commerce tax.
- New Mexico rises from 37th to 35th after a corporate tax rate phaseout began to take effect.
- New York remains 49th overall but its corporate tax component rose dramatically from 21st to 12th after a significant multi-year corporate tax reform began to take effect. When fully phased in, we project New York will have the best corporate tax system of the states with corporate income tax.
- Rhode Island improved its corporate tax component after finally repealing its antiquated capital stock tax and reducing its corporate tax rate from 9 percent to 7 percent.
- West Virginia rises from 22nd to 21st after completing the phase-out of its franchise tax.
- The District of Columbia improved three ranks as it continued to phase in a tax reform package that lowered individual income tax rates for middle income brackets, expanded the sales tax base, reduced business taxes, and raised the estate tax exemption.
- Additional changes in Arizona, Indiana, Kansas, Missouri, New Mexico, New York, North Carolina, Ohio, Pennsylvania, and Texas are scheduled for future years but had not taken effect by our report’s snapshot date of July 1, 2015.