While tax rates on businesses are not necessarily the best indicator of a state’s business friendliness, tax rates are an easy way to rank the states and provide lots of ammunition for one state’s business community to compete with another.
Whether or not that is just a zero-sum game probably depends on your point of view, but the Tax Foundation, which produces an annual report on the best and worst states for taxes, does not see that as a bad thing:
It is important to remember that even in our global economy, states’ stiffest competition often comes from other states. The Department of Labor reports that most mass job relocations are from one U.S. state to another rather than to a foreign location. … Tax competition is an unpleasant reality for state revenue and budget officials, but it is an effective restraint on state and local taxes. When a state imposes higher taxes than a neighboring state, businesses will cross the border to some extent. Therefore, states with more competitive tax systems score well in the [State Business Tax Climate] Index, because they are best suited to generate economic growth.
With that in mind, here are the 10 states with the worst business tax climate index scores, according to the Tax Foundation:
50. New Jersey
49. New York
48. California
47. Minnesota
46. Vermont
45. Rhode Island
44. Connecticut
43. Wisconsin
42. Ohio
41. Maryland
According to the Tax Foundation, the states at the bottom of the rankings “tend to have a number of afflictions in common: complex, non-neutral taxes with comparatively high rates.”
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