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Ranking Summary

The State Business Tax Climate Index is a measure of how well states structure their tax systems. It enables policymakers, business leaders, and taxpayers to gauge how their states’ tax systems compare, and provides a roadmap for improvement.

Hover over a state in the map to see its rankings. Click a state or tax category to learn more!

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Overall and Component Tax Ranks

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State	Overall Rank	Corporate Taxes	Individual Taxes	Sales Taxes	Property Taxes	Unemp. Insur. Taxes
AlabamaAL	40	23	30	50	15	18
AlaskaAK	3	26	1	5	25	46
ArizonaAZ	20	22	17	40	8	6
ArkansasAR	46	34	40	46	29	23
CaliforniaCA	48	28	49	45	16	22
ColoradoCO	17	7	14	37	14	43
ConnecticutCT	47	27	43	26	50	21
DelawareDE	11	50	41	2	6	3
FloridaFL	4	9	1	23	13	2
GeorgiaGA	32	6	36	29	28	39
HawaiiHI	37	16	47	30	11	28
IdahoID	21	29	26	12	4	48
IllinoisIL	35	36	13	33	40	40
IndianaIN	10	11	15	20	2	25
IowaIA	42	48	42	15	35	35
KansasKS	34	35	23	38	20	14
KentuckyKY	24	17	18	14	36	49
LouisianaLA	41	37	32	48	33	4
MaineME	33	38	22	8	43	32
MarylandMD	43	32	45	19	42	33
MassachusettsMA	36	39	11	13	48	50
MichiganMI	12	18	12	9	24	17
MinnesotaMN	45	44	46	28	26	34
MississippiMS	31	10	27	34	37	5
MissouriMO	14	5	24	24	7	9
MontanaMT	5	21	25	3	12	20
NebraskaNE	28	31	21	10	41	11
NevadaNV	7	25	5	44	10	47
New HampshireNH	6	43	9	1	44	45
New JerseyNJ	50	49	50	42	47	30
New MexicoNM	22	20	31	41	1	8
New YorkNY	49	13	48	43	46	38
North CarolinaNC	15	3	16	21	34	10
North DakotaND	16	19	20	27	3	13
OhioOH	38	42	44	32	9	7
OklahomaOK	27	8	33	39	19	1
OregonOR	8	33	38	4	18	36
PennsylvaniaPA	29	46	19	17	21	42
Rhode IslandRI	39	40	29	25	45	31
South CarolinaSC	30	4	34	31	30	26
South DakotaSD	2	1	1	35	22	44
TennesseeTN	18	24	8	47	31	24
TexasTX	13	47	6	36	38	12
UtahUT	9	12	10	22	5	15
VermontVT	44	45	39	16	49	16
VirginiaVA	25	14	35	11	32	41
WashingtonWA	19	41	6	49	27	19
West VirginiaWV	23	15	28	18	17	29
WisconsinWI	26	30	37	7	23	37
WyomingWY	1	1	1	6	39	27
District of ColumbiaDC	47	15	45	36	49	35

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Ranked Tax Categories

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Corporate Taxes

The corporate tax component measures impacts of states’ major taxes on business activities, both corporate income and gross receipts taxes.

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Individual Taxes

The individual income tax component of the Index measures the impact of state and local taxes that fall on pass-through businesses.

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Sales Taxes

The sales tax component measures the impact of both sales and excise taxes, particularly when they fall upon business inputs.

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Property Taxes

The property tax component measures impacts of real and personal property, inventory, estate, inheritance, and other wealth taxes.

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Unemployment Insurance Taxes

The unemployment insurance tax component measures the impact of state UI tax attributes, from schedules to charging methods, on businesses.

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Notable Ranking Changes

Arizona

As part of the state’s belated conformity with the new federal tax law, Arizona trimmed its income tax rates, bringing the top rate down from 4.54 to 4.5 percent and consolidating the two lowest brackets. The reduction was too modest to improve Arizona’s overall rank, but drove a two-place improvement in Arizona’s rank on the individual income tax component of the Index, from 19th to 17th.

District of Columbia

The federal district slid eight places on the sales tax component of the Index when it raised its sales tax rate from 5.75 to 6 percent, reversing a reduction made in 2013. This significant movement is reflective of how many states with similar sales tax structures are tightly bunched around a 6 percent rate. The District of Columbia remains 47th overall, although D.C. is given “phantom” ranks in the Index, meaning that its ranks are given by way of example and do not affect the rankings of the 50 states.

Georgia

In 2018, in response to base broadening from federal tax reform, Georgia lawmakers adopted a tax cut package which reduces individual and corporate income tax rates from 6.0 to 5.5 percent in two phases, beginning with reductions to 5.75 percent for tax year 2019. Rates are scheduled to revert after 2025, when the federal changes are currently expected to sunset. These rate reductions helped Georgia improve four places on this year’s Index, from 36th to 32nd overall, while going from 8th to 6th on the corporate tax component, where the lower rate complements an already competitive overall tax structure, and from 38th to 36th on the individual income tax component. The state’s corporate tax component score, in both the 2019 and 2020 Index, also benefits from the state’s decision to decouple from GILTI, which was newly introduced as an Index variable this year.

Indiana

The only state to make midyear rate adjustments, Indiana made another scheduled adjustment to its corporate income tax rate on July 1, 2019, the Index’s snapshot date, bringing the rate from 5.75 to 5.5 percent. This reduction was not enough to improve the state’s already highly competitive overall rank, but, along with modestly negative corporate tax changes in similarly ranked states, helped Indiana improve from 18th to 11th on the corporate tax component of the Index.

Iowa

This year marked the first phase of Iowa’s tax reform package, which will ultimately convert the state’s nine-bracket individual income tax, with a top rate of 8.98 percent, to a four-bracket tax with a top rate of 6.5 percent, while increasing Section 179 small business expensing and eliminating the state’s unusual policy of federal deductibility. Modest sales tax base broadening also features in the package, and the corporate rate will decline from 12 to 9.8 percent, though that rate reduction remains several years out. This year, the top marginal individual income tax rate was cut from 8.98 to 8.53 percent and the Section 179 expensing allowance rose from $70,000 to $100,000, yielding an improvement of one place on the Index overall, from 43rd to 42nd. Further improvements can be anticipated once additional reforms phase in.

Kansas

Through a combination of legislative inaction, vetoes, and agency actions, Kansas has taken an aggressive stance on the taxation of international income and is moving forward with sales tax collection requirements for remote sellers without adopting a safe harbor for small sellers. Because many of its peers have taken a less aggressive approach to the taxation of international income, and no other state has adopted a remote sales tax regime without a de minimis threshold, Kansas dropped seven places on the Index overall, from 27th to 34th.

Massachusetts

Massachusetts adopted a payroll tax of 0.63 percent in addition to its individual income tax, which phased down from a 5.1 to a 5.05 percent flat rate. (We consider the 0.63 percent tax an increase in the rate on wage income for purposes of the Index.) The state also increased unemployment insurance rates, reestablished a sales tax holiday, and made other changes which resulted in a decline from 33rd to 36th overall on the Index.

Missouri

A reduction in the state’s top individual income tax rate, from 5.9 to 5.4 percent, along with the consolidation of an income tax bracket, improved the state two places on the individual income tax component, from 26th to 24th. Reforms adopted in 2018 will see the individual income tax rate continue to phase down in future years, with a target of 5.1 percent. Next year, the state will no longer give companies the option of choosing the apportionment formula most favorable to them, but this consolidation into a single apportionment formula will pay down a significant corporate income tax rate reduction, from 6.25 to 4 percent, which will further improve the state’s rank.

New Hampshire

The Granite State climbed from 7th to 6th overall, and from 46th to 43rd on the corporate tax component, by trimming the rates of both its Business Profits Tax, a corporate income tax, and its Business Enterprise Tax, a value-added tax. The Business Profits Tax rate is now 7.7 percent, down from 7.9 percent in 2018 and 8.2 percent before that, while the Business Enterprise Tax now stands at 0.6 percent, having phased down from 0.675 percent last year and 0.72 percent before that.

North Carolina

North Carolina’s individual income tax rate decreased from 5.499 to 5.25 percent, while the corporate income tax rate—already the nation’s lowest—was cut from 3 to 2.5 percent, completing the latest in several rounds of tax reforms and rate reductions in North Carolina in recent years. These improvements, however, did not help the state on the Index overall, because they failed to leapfrog any states on the corporate or individual income tax components, while changes to the state’s unemployment insurance tax regime, along with improvements in other highly competitive states, slid the state three places from 12th to 15th.

Utah

Utah slid from 8th to 9th on the Index as the state increased its sales tax by 0.15 percentage points in support of Medicaid expansion, but barring new developments, the state is likely to reclaim its old position next year, when Oregon (now in 8th place) implements its newly-adopted gross receipts tax.

Wisconsin

The culmination of a tax package adopted in 2017, Wisconsin repealed its alternative minimum tax for individual filers effective January 2019 and improved two places on the individual component of the Index. The state also benefited greatly from other states shifting around it, increasing its overall rank dramatically, to 26th from 34th.

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Overall and Component Tax Ranks

Ranked Tax Categories

Corporate Taxes

Individual Taxes

Sales Taxes

Property Taxes

Unemployment Insurance Taxes

Notable Ranking Changes

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