Ranking Property Taxes on the 2022 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 2022 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 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 accounts for 14.4 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 tax 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 most businesses face. In fiscal year 2020, taxes on real, personal, and utility property accounted for almost 38 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, Nevada, and Ohio. States with the worst scores on this component are Connecticut, Vermont, Illinois, New York, New Hampshire, Massachusetts, 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.)

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