Ranking Property Taxes on the 2019 State Business Tax Climate Index

October 24, 2018

Today’s map shows states’ rankings on the property tax component of the 2019 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 15.4 percent of each state’s overall Index score.

Property taxes matter to businesses for several reasons. To start, tax rates on commercial property are often higher than the rates on comparable residential property. In addition, many states and localities 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, such as trademarks. Across the nation, property taxes represent one of the most substantial state and local tax burdens most businesses face. In fiscal year 2013, taxes on real, personal, and utility property accounted for 36.1 percent of all taxes paid by businesses to state and local governments.

While taxes on real property tend to be publicly unpopular, when structured properly, they conform well to the benefit principle (the idea in public finance that taxes paid should relate to benefits received), and they are more transparent than other taxes.

However, taxes on intangible property, wealth, and asset transfers 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 attractive for business investment because these taxes at times incentivize business decisions that are contrary to basic economic principles. For example, businesses with valuable trademarks may seek to avoid states with intangible property taxes, and retailers that store large amounts of merchandise might alter their business practices in states with high inventory taxes.

States put themselves in a better position to attract business investment when they maintain competitive real property tax rates and avoid harmful taxes on intangible property, wealth, and asset transfers. This year, the states with the best scores on the property tax component are New Mexico, Indiana, Utah, Idaho, Arizona, and North Dakota. On the other end of the spectrum, Connecticut, Vermont, New Jersey, New York, the District of Columbia, Massachusetts, and Illinois had the lowest scores on the property tax component.

How does your state rank on property taxes? 2019

To see an interactive version of states’ rankings on the Index’s property tax component, click the map above.

To gauge whether your state’s property tax structure has become more or less competitive in the past four years, see the table below.

Property Tax Component of the State Business Tax Climate Index (2016–2019)
  2016 Rank 2017 Rank 2018 Rank 2019 Rank Change in Rank from 2018 to 2019

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.

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

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