The U.S. federal tax code is arguably more demoralizing than it should be, in part due to the millions of dollars tax-filing service providers spend on lobbying against simpler procedures used in other developed countries. (Here are counties where families need to budget the most for taxes in every state.)
But at least the federal tax code is uniform across the country. State and local taxes vary widely from one place to the next, which means Americans who move or work across state lines must adapt themselves to changes in state and local tax codes.
One way to measure a state’s tax “friendliness” is to examine the individual and corporate state income taxes, and the average of state and local sales taxes. These are the primary taxes paid by most Americans and the main sources of public revenue to help finance public services and infrastructure, from Medicare and Medicaid to roads and parks maintenance to the salaries of teachers, police, and fire departments.
To determine the most and least tax-friendly states for business, 24/7 Wall St. reviewed data from the Tax Foundation’s 2022 State Business Tax Climate Index. States were ranked based on their State Business Tax Climate Index score, a composite of five factors measuring individual 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 individual income tax: Texas, Tennessee, Nevada, Florida, Alaska, and South Dakota. Four states have no individual income tax and no corporate income 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 tax on gross receipts, a tax on a company’s sales without cost-of-business deductions. While Ohio, Texas, and Washington do not have a corporate income tax, they do have a gross receipts tax. Meanwhile, Delaware and Virginia have a gross receipts tax in addition to the corporate income tax.
Weighing the tax burdens of individuals and companies can lead to a general determination of a state’s tax friendliness — meaning lower taxes. In some states, lower taxes also mean fewer social services, higher deficits, and/or dependence on federal subsidies funded by taxpayers in other states.
Here are the most and least tax friendly states
Click here to see our detailed methodology
50. New Jersey
> Tax-friendliness score: 3.34/10
> Top individual income tax rate: 10.8% (4th highest)
> Top corporate income tax rate: 11.5% (the highest)
> State & avg. local sales tax rate: 6.6% (21st lowest)
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49. New York
> Tax-friendliness score: 3.58/10
> Top individual income tax rate: 10.9% (3rd highest)
> Top corporate income tax rate: 7.3% (19th highest)
> State & avg. local sales tax rate: 8.5% (10th highest)
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48. California
> Tax-friendliness score: 3.59/10
> Top individual income tax rate: 13.3% (the highest)
> Top corporate income tax rate: 8.8% (8th highest)
> State & avg. local sales tax rate: 8.8% (7th highest)
47. Connecticut
> Tax-friendliness score: 4.08/10
> Top individual income tax rate: 7.0% (13th highest)
> Top corporate income tax rate: 7.5% (16th highest)
> State & avg. local sales tax rate: 6.4% (18th lowest)
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46. Maryland
> Tax-friendliness score: 4.28/10
> Top individual income tax rate: 5.8% (21st highest)
> Top corporate income tax rate: 8.3% (11th highest)
> State & avg. local sales tax rate: 6.0% (13th lowest)
45. Minnesota
> Tax-friendliness score: 4.35/10
> Top individual income tax rate: 9.9% (6th highest)
> Top corporate income tax rate: 9.8% (3rd highest)
> State & avg. local sales tax rate: 7.5% (17th highest)
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44. Arkansas
> Tax-friendliness score: 4.42/10
> Top individual income tax rate: 5.5% (25th highest)
> Top corporate income tax rate: 5.9% (21st lowest)
> State & avg. local sales tax rate: 9.5% (3rd highest)
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43. Vermont
> Tax-friendliness score: 4.43/10
> Top individual income tax rate: 8.8% (7th highest)
> Top corporate income tax rate: 8.5% (10th highest)
> State & avg. local sales tax rate: 6.2% (15th lowest)
42. Louisiana
> Tax-friendliness score: 4.50/10
> Top individual income tax rate: 4.3% (13th lowest)
> Top corporate income tax rate: 7.5% (16th highest)
> State & avg. local sales tax rate: 9.6% (the highest)
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41. Hawaii
> Tax-friendliness score: 4.52/10
> Top individual income tax rate: 11.0% (2nd highest)
> Top corporate income tax rate: 6.4% (24th lowest)
> State & avg. local sales tax rate: 4.4% (6th lowest)
40. Rhode Island
> Tax-friendliness score: 4.56/10
> Top individual income tax rate: 6.0% (19th highest)
> Top corporate income tax rate: 7.0% (20th highest)
> State & avg. local sales tax rate: 7.0% (24th highest)
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39. Alabama
> Tax-friendliness score: 4.57/10
> Top individual income tax rate: 5.0% (24th lowest)
> Top corporate income tax rate: 6.5% (23rd highest)
> State & avg. local sales tax rate: 9.2% (5th highest)
38. Iowa
> Tax-friendliness score: 4.62/10
> Top individual income tax rate: 8.5% (8th highest)
> Top corporate income tax rate: 9.8% (3rd highest)
> State & avg. local sales tax rate: 6.9% (23rd lowest)
37. Ohio
> Tax-friendliness score: 4.72/10
> Top individual income tax rate: 4.0% (11th lowest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 7.2% (20th highest)
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36. Illinois
> Tax-friendliness score: 4.73/10
> Top individual income tax rate: 5.0% (18th lowest)
> Top corporate income tax rate: 9.5% (5th highest)
> State & avg. local sales tax rate: 8.8% (8th highest)
35. Nebraska
> Tax-friendliness score: 4.93/10
> Top individual income tax rate: 6.8% (14th highest)
> Top corporate income tax rate: 7.5% (16th highest)
> State & avg. local sales tax rate: 6.9% (23rd lowest)
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34. Massachusetts
> Tax-friendliness score: 4.95/10
> Top individual income tax rate: 5.0% (24th lowest)
> Top corporate income tax rate: 8.0% (12th highest)
> State & avg. local sales tax rate: 6.3% (16th lowest)
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33. Maine
> Tax-friendliness score: 4.96/10
> Top individual income tax rate: 7.1% (10th highest)
> Top corporate income tax rate: 8.9% (7th highest)
> State & avg. local sales tax rate: 5.5% (9th lowest)
32. Georgia
> Tax-friendliness score: 4.97/10
> Top individual income tax rate: 5.8% (21st highest)
> Top corporate income tax rate: 5.8% (19th lowest)
> State & avg. local sales tax rate: 7.4% (19th highest)
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31. South Carolina
> Tax-friendliness score: 4.98/10
> Top individual income tax rate: 7.0% (11th highest)
> Top corporate income tax rate: 5.0% (17th lowest)
> State & avg. local sales tax rate: 7.4% (18th highest)
30. Mississippi
> Tax-friendliness score: 4.99/10
> Top individual income tax rate: 5.0% (24th lowest)
> Top corporate income tax rate: 5.0% (17th lowest)
> State & avg. local sales tax rate: 7.1% (22nd highest)
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29. Pennsylvania
> Tax-friendliness score: 5.00/10
> Top individual income tax rate: 3.1% (9th lowest)
> Top corporate income tax rate: 10.0% (2nd highest)
> State & avg. local sales tax rate: 6.3% (17th lowest)
28. New Mexico
> Tax-friendliness score: 5.05/10
> Top individual income tax rate: 5.9% (20th highest)
> Top corporate income tax rate: 5.9% (21st lowest)
> State & avg. local sales tax rate: 7.8% (15th highest)
27. Oklahoma
> Tax-friendliness score: 5.07/10
> Top individual income tax rate: 4.8% (16th lowest)
> Top corporate income tax rate: 4.0% (9th lowest)
> State & avg. local sales tax rate: 9.0% (6th highest)
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26. Wisconsin
> Tax-friendliness score: 5.07/10
> Top individual income tax rate: 7.7% (9th highest)
> Top corporate income tax rate: 7.9% (13th highest)
> State & avg. local sales tax rate: 5.4% (8th lowest)
25. Kansas
> Tax-friendliness score: 5.08/10
> Top individual income tax rate: 5.7% (24th highest)
> Top corporate income tax rate: 7.0% (20th highest)
> State & avg. local sales tax rate: 8.7% (9th highest)
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24. Virginia
> Tax-friendliness score: 5.08/10
> Top individual income tax rate: 5.8% (21st highest)
> Top corporate income tax rate: 6.0% (23rd lowest)
> State & avg. local sales tax rate: 5.8% (10th lowest)
23. Arizona
> Tax-friendliness score: 5.10/10
> Top individual income tax rate: 4.5% (14th lowest)
> Top corporate income tax rate: 4.9% (13th lowest)
> State & avg. local sales tax rate: 8.4% (11th highest)
22. Oregon
> Tax-friendliness score: 5.15/10
> Top individual income tax rate: 9.9% (5th highest)
> Top corporate income tax rate: 7.6% (14th highest)
> State & avg. local sales tax rate: 0.0% (4th lowest)
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21. West Virginia
> Tax-friendliness score: 5.19/10
> Top individual income tax rate: 6.5% (17th highest)
> Top corporate income tax rate: 6.5% (23rd highest)
> State & avg. local sales tax rate: 6.5% (20th lowest)
20. Colorado
> Tax-friendliness score: 5.23/10
> Top individual income tax rate: 4.6% (15th lowest)
> Top corporate income tax rate: 4.6% (11th lowest)
> State & avg. local sales tax rate: 7.8% (16th highest)
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19. North Dakota
> Tax-friendliness score: 5.24/10
> Top individual income tax rate: 2.9% (8th lowest)
> Top corporate income tax rate: 4.3% (10th lowest)
> State & avg. local sales tax rate: 7.0% (24th lowest)
18. Idaho
> Tax-friendliness score: 5.28/10
> Top individual income tax rate: 6.0% (18th highest)
> Top corporate income tax rate: 6.5% (23rd highest)
> State & avg. local sales tax rate: 6.0% (14th lowest)
17. Kentucky
> Tax-friendliness score: 5.28/10
> Top individual income tax rate: 5.0% (24th lowest)
> Top corporate income tax rate: 5.0% (17th lowest)
> State & avg. local sales tax rate: 6.0% (13th lowest)
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16. Delaware
> Tax-friendliness score: 5.32/10
> Top individual income tax rate: 6.6% (16th highest)
> Top corporate income tax rate: 8.7% (9th highest)
> State & avg. local sales tax rate: 0.0% (4th lowest)
15. Washington
> Tax-friendliness score: 5.39/10
> Top individual income tax rate: 7.0% (11th highest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 9.3% (4th highest)
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14. Texas
> Tax-friendliness score: 5.56/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 8.2% (14th highest)
13. Missouri
> Tax-friendliness score: 5.57/10
> Top individual income tax rate: 5.4% (25th lowest)
> Top corporate income tax rate: 4.0% (9th lowest)
> State & avg. local sales tax rate: 8.3% (12th highest)
12. Michigan
> Tax-friendliness score: 5.58/10
> Top individual income tax rate: 4.3% (13th lowest)
> Top corporate income tax rate: 6.0% (23rd lowest)
> State & avg. local sales tax rate: 6.0% (13th lowest)
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11. North Carolina
> Tax-friendliness score: 5.61/10
> Top individual income tax rate: 5.0% (19th lowest)
> Top corporate income tax rate: 2.5% (7th lowest)
> State & avg. local sales tax rate: 7.0% (25th lowest)
10. Indiana
> Tax-friendliness score: 5.64/10
> Top individual income tax rate: 3.2% (10th lowest)
> Top corporate income tax rate: 4.9% (13th lowest)
> State & avg. local sales tax rate: 7.0% (24th highest)
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9. Utah
> Tax-friendliness score: 5.64/10
> Top individual income tax rate: 5.0% (18th lowest)
> Top corporate income tax rate: 5.0% (14th lowest)
> State & avg. local sales tax rate: 7.2% (21st highest)
8. Tennessee
> Tax-friendliness score: 5.68/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 6.5% (23rd highest)
> State & avg. local sales tax rate: 9.6% (the highest)
7. Nevada
> Tax-friendliness score: 5.95/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 8.2% (13th highest)
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6. New Hampshire
> Tax-friendliness score: 6.01/10
> Top individual income tax rate: 5.0% (24th lowest)
> Top corporate income tax rate: 7.6% (14th highest)
> State & avg. local sales tax rate: 0.0% (4th lowest)
5. Montana
> Tax-friendliness score: 6.05/10
> Top individual income tax rate: 6.8% (15th highest)
> Top corporate income tax rate: 6.8% (22nd highest)
> State & avg. local sales tax rate: 0.0% (4th lowest)
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4. Florida
> Tax-friendliness score: 6.93/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 5.5% (18th lowest)
> State & avg. local sales tax rate: 7.0% (23rd highest)
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3. Alaska
> Tax-friendliness score: 7.28/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 9.4% (6th highest)
> State & avg. local sales tax rate: 1.8% (5th lowest)
2. South Dakota
> Tax-friendliness score: 7.49/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 6.4% (19th lowest)
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1. Wyoming
> Tax-friendliness score: 7.78/10
> Top individual income tax rate: 0.0% (7th lowest)
> Top corporate income tax rate: 0.0% (6th lowest)
> State & avg. local sales tax rate: 5.2% (7th lowest)
Methodology
To determine the most and least tax-friendly states for business, 24/7 Wall St. reviewed data from the Tax Foundation’s 2022 State Business Tax Climate Index. States were ranked based on their State Business Tax Climate Index score, a composite of five factors measuring individual income tax, sales tax, corporate income tax, property tax, and unemployment insurance tax.
The Tax Foundation weighted the individual income tax component at 31.2%, the sales tax at 23.7%, corporate tax at 20.9%, property tax at 14.4%, and unemployment insurance tax at 9.8%.
Data on the individual income tax rate at the highest income bracket and the corporate income tax rate at the highest income bracket came from the Tax Foundation and figures are current as of Jan. 1, 2022. Data on the combined state sales tax rate and the average of all local tax rates within a state came from the Tax Foundation and figures are current as of Jan. 1, 2022.
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