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Discover your state’s business tax climate

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in Small Business Tax

Which states have the best tax climates for business operations? You don’t have to look very far for a definitive answer.

Alert: The Tax Foundation, an independent research group, recently posted its annual State Business Tax Climate Index (SBTCI) for 2016. It is based on figures as of July 1, 2015.

The SBTCI enables business leaders, government policymakers and taxpayers to compare their states’ tax systems. Although there are numerous ways to show how much is collected in taxes by state governments, the index is designed to show how well states structure their tax systems and provides a road map for improvement.

The 10 best states in this year’s index are:

  1. Wyoming  
  2. South Dakota 
  3. Alaska 
  4. Florida 
  5. Nevada   
  6. Montana
  7. New Hampshire
  8. Indiana
  9. Utah
  10. Texas

The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but several states don’t have one or more of the major taxes such as the corporate income tax, the individual income tax or the sales tax.

Wyoming, Nevada, South Dakota and Texas have no corporate or individual income tax (though Nevada and Texas both impose gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax.

Conversely, the 10 states with the lowest rankings in the 2016 index are:

  1. Maryland   
  2. Ohio 
  3. Wisconsin   
  4. Connecticut   
  5. Rhode Island 
  6. Vermont
  7. Minnesota
  8. California
  9. New York
  10. New Jersey

The states in the bottom 10 tend to share several common traits, such as complex, non-neutral taxes with comparatively high rates. For example, New Jersey is hampered by some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance tax and an estate tax and maintains some of the worst-structured individual income taxes in the country.

Tip: Find the SBTCI at http://taxfoundation.org/article/2016-state-business-tax-climate-index.

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