Home New mexico tax Most and least tax-friendly states for businesses – 24/7 Wall St.

Most and least tax-friendly states for businesses – 24/7 Wall St.

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The U.S. federal tax code is arguably more demoralizing than it should be, in part because of the millions of dollars tax filing service providers spend lobbying against the simpler procedures used in other developed nations. (Here are the counties where families should budget the most for taxes in each state.)

But at least the federal tax code is uniform across the country. State and local taxes vary widely from place to place, which means Americans who move or work across state lines must adapt to changes in state and local tax codes.

One way to measure a state’s tax “friendliness” is to look at personal and corporate income taxes, as well as average state and local sales taxes. They are the main taxes paid by most Americans and the main sources of public revenue to help fund public services and infrastructure, from Medicare and Medicaid to road and park maintenance to teacher salaries, police and firefighters.

To determine the most and least tax-friendly states for businesses, 24/7 Wall St. looked at data from the Tax Foundation’s State Enterprise Tax Climate Index 2022. States were ranked by their State Business Tax Climate Index score, a composite of five factors measuring personal income tax, sales tax, corporate income tax, property tax and unemployment insurance tax. (Here are the states with the highest and lowest property taxes.)

According to the most recent data from the Tax Foundation, seven states levy no personal income tax: Texas, Tennessee, Nevada, Florida, Alaska and South Dakota. Four states have no personal income tax or corporate tax: Texas, Nevada, South Dakota and Wyoming.

Additionally, South Dakota and Wyoming are the only two states in the country that have no income tax, no corporate income tax, and no gross receipts tax, a tax on the sales of a business without deducting the cost of the business. While Ohio, Texas, and Washington have no corporate income tax, they do have a gross receipts tax. Meanwhile, Delaware and Virginia have a gross receipts tax in addition to corporate income tax.

Weighing personal and corporate tax burdens can lead to a general determination of a state’s tax friendliness, which means lower taxes. In some states, lower taxes also mean fewer social services, higher deficits, and/or reliance on taxpayer-funded federal grants from other states.

Here are the most and least tax-friendly states
Click here to see our detailed methodology