Electric car maker Tesla (TSLA) – Get Tesla Inc Report was a high-profile company of several that recently moved its headquarters out of California to another state like Texas or Arizona.
While Elon Musk cited Covid-19 shutdown restrictions as a reason, companies are relocating out of California partly because of costs—including taxes that affect both their bottom line and the workers they hire, according to a report by the Hoover Institution.
When seeking the best place to locate a business or a company’s headquarters, costs are a factor, but other resources matter too. A WalletHub ranking of best states for starting a business also weighs the availability of human capital, higher education assets, local demographics and industry variety. Similarly, a survey by Thumbtack asked respondents about the ease of hiring, local regulations, licensing and availability of training and networking programs.
The Tax Foundation ranks all 50 states and the District of Columbia on business tax climate by scoring each on five components: corporate taxes, individual income taxes, sales taxes, property taxes and unemployment insurance taxes, though the five are not weighted equally.
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The amount of taxes isn’t the only factor in the ranking: how well each system is structured is another way for business leaders, policymakers and taxpayers to gauge business tax climate, according to the Tax Foundation, an independent tax policy research organization.
Some states do not even levy one or more of the five major taxes, and this is a common factor among most of those that rank highest. Several states have no state income tax, and three of those (Nevada, South Dakota, and Wyoming) have no corporate tax.
Wyoming and South Dakota, the top two states on this list, also levy neither a corporate income tax nor a gross receipts tax. Wyoming is also one of the states with well-structured sales taxes and modest excise tax rates, according to the Tax Foundation. (It’s also one of the states with the lowest tax on beer, at two cents a gallon.)
At the other end of the spectrum, New Jersey, ranked worst, has some of the highest property tax burdens in the country, the highest corporate income taxes and among the highest individual income taxes in the country. New Jersey also levies an inheritance tax, and maintains what the Tax Foundation calls some of the nation’s worst-structured individual income taxes.
Based on their 2022 State Business Tax Climate Index, these are the best and worst states for business taxes.
The States With the Best Business Tax Climate1. Wyoming
Corporate tax rank: 1Individual income tax rank: 1Sales tax rank: 6Property tax rank: 35Unemployment insurance tax rank: 312. South Dakota
Corporate tax rank: 1Individual income tax rank: 1Sales tax rank: 34Property tax rank: 18Unemployment insurance tax rank: 383. Alaska
Corporate tax rank: 28Individual income tax rank: 1Sales tax rank: 5Property tax rank: 24Unemployment insurance tax rank: 43Shutterstock
4. Florida
Corporate tax rank: 7Individual income tax rank: 1Sales tax rank: 21Property tax rank: 12Unemployment insurance tax rank: 25. Montana
Corporate tax rank: 22Individual income tax rank: 24Sales tax rank: 3Property tax rank: 29Unemployment insurance tax rank: 196. New Hampshire
Corporate tax rank: 41Individual income tax rank: 9Sales tax rank: 1Property tax rank: 46Unemployment insurance tax rank: 447. Nevada
Corporate tax rank: 25Individual income tax rank: 5Sales tax rank: 44Property tax rank: 5Unemployment insurance tax rank: 458. Tennessee
Corporate tax rank: 26Individual income tax rank: 6Sales tax rank: 46Property tax rank: 33Unemployment insurance tax rank: 209. Indiana
Corporate tax rank: 11Individual income tax rank: 15Sales tax rank: 19Property tax rank: 1Unemployment insurance tax rank: 25Shutterstock
10. Utah
Corporate tax rank: 14Individual income tax rank: 10Sales tax rank: 22Property tax rank: 7Unemployment insurance tax rank: 1711. North Carolina
Corporate tax rank: 4Individual income tax rank: 16Sales tax rank: 20Property tax rank: 13Unemployment insurance tax rank: 12Byelikova Oksana / Shutterstock
12. Michigan
Corporate tax rank: 20Individual income tax rank: 12Sales tax rank: 10Property tax rank: 21Unemployment insurance tax rank: 713. Missouri
Corporate tax rank: 3Individual income tax rank: 21Sales tax rank: 25Property tax rank: 8Unemployment insurance tax rank: 414. Texas
Corporate tax rank: 47Individual income tax rank: 7Sales tax rank: 36Property tax rank: 37Unemployment insurance tax rank: 1415. Washington
Corporate tax rank: 39Individual income tax rank: 7Sales tax rank: 49Property tax rank: 20Unemployment insurance tax rank: 24 The States With the Worst Business Tax ClimateShutterstock
50. New Jersey
Corporate tax rank: 48Individual income tax rank: 48Sales tax rank: 43Property tax rank: 44Unemployment insurance tax rank: 32Shutterstock
49. New York
Corporate tax rank: 24Individual income tax rank: 50Sales tax rank: 42Property tax rank: 47Unemployment insurance tax rank: 36Photo: JJM Photography / Shutterstock
48. California
Corporate tax rank: 46Individual income tax rank: 49Sales tax rank: 47Property tax rank: 14Unemployment insurance tax rank: 2348. District of Columbia
Corporate tax rank: 25Individual income tax rank: 48Sales tax rank: 37Property tax rank: 50Unemployment insurance tax rank: 39(D.C.’s score and rank do not affect those of other states.)
47. Connecticut
Corporate tax rank: 27Individual income tax rank: 47Sales tax rank: 23Property tax rank: 50Unemployment insurance tax rank: 22Shutterstock
46. Maryland
Corporate tax rank: 33Individual income tax rank: 45Sales tax rank: 26Property tax rank: 43Unemployment insurance tax rank: 46Shutterstock
45. Minnesota
Corporate tax rank: 45Individual income tax rank: 43Sales tax rank: 29Property tax rank: 32Unemployment insurance tax rank: 3044. Arkansas
Corporate tax rank: 30Individual income tax rank: 39Sales tax rank: 45Property tax rank: 27Unemployment insurance tax rank: 3343. Vermont
Corporate tax rank: 43Individual income tax rank: 40Sales tax rank: 16Property tax rank: 49Unemployment insurance tax rank: 1542. Louisiana
Corporate tax rank: 34Individual income tax rank: 34Sales tax rank: 48Property tax rank: 23Unemployment insurance tax rank: 5Shutterstock
41. Hawaii
Corporate tax rank: 19Individual income tax rank: 46Sales tax rank: 28Property tax rank: 30Unemployment insurance tax rank: 29Shutterstock
40. Rhode Island
Corporate tax rank: 37Individual income tax rank: 31Sales tax rank: 24Property tax rank: 42Unemployment insurance tax rank: 4939. Alabama
Corporate tax rank: 17Individual income tax rank: 27Sales tax rank: 50Property tax rank: 19Unemployment insurance tax rank: 1838. Iowa
Corporate tax rank: 38Individual income tax rank: 38Sales tax rank: 15Property tax rank: 39Unemployment insurance tax rank: 34Steve Lagreca / Shutterstock
37. Ohio
Corporate tax rank: 40Individual income tax rank: 41Sales tax rank: 35Property tax rank: 6Unemployment insurance tax rank: 10You can see the full ranking at the Tax Foundation, their methodology, and read about recent and proposed changes not reflected in the ranking.