Just as words have meaning, taxes have economic ramifications. This annual blog on the Best State Tax Business Environments begins as it commenced and ended each of the past three years in the prior sentence.
Each state varies in one form or another in how much services their government provides and how those services are funded. Big government requires big funding, and vice-versa. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market. Nor is there such a thing as equal sources for tax revenues for state governments.
Some places are more expensive than others and some are cheaper. That statement also applies to state and local taxes as each government entity has taken differing approaches to the services provided to residents and how those are funded.
To compare the state tax environments, each year the Tax Foundation analyses five taxes and ranks all 50 states on each. Taxes ranked included the following five categories along with the relative weighting of each. These weightings were selected to incorporate higher deviations within each tax and then were normalized allowing comparison of states across the indices from one tax to the next.
- 19.7 Percent – Corporate Income Tax
- 30.2 Percent – Individual Income Tax
- 24.0 Percent – Sales Tax
- 9.5 Percent – Unemployment Insurance Tax
- 16.6 Percent – Property Tax
The next table shows the best and worst 10 ranked states overall based on five taxes, using the applied weightings and rankings.
The overall ranking for each state is shown in the following graphic per the Tax Foundation.
Some states use all of these taxes as revenue sources while others do not. Just because a state collects all five taxes does not, however, necessarily imply the state has comparatively high overall taxes. Both Utah and Indiana utilize all five tax sources, but at a lower comparative rate, and thus rank among the 10 states with the lowest overall incidence of state taxation.
The following tables show the top- and bottom-10 rankings among each of the individual tax categories.
To download the entire study from the Tax Foundation click https://taxfoundation.org/publications/state-business-tax-climate-index/
For more information about the Tax Foundation and access to their research and studies click https://taxfoundation.org/ The Tax Foundation now also includes an analysis of the spending and funding plans for all currently running for President of The United States of America.
Just as words have meaning, taxes have economic ramifications. For businesses and people alike.