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10 Friendliest (Tax) States for Business

(posted: May 8th, 2015)

Where are the best places in the country to do business from a tax perspective?

You don't have to look very far for an answer.

The Tax Foundation, an independent research group, recently posted its annual State Business Tax Climate Index (SBTCI) for 2015. It is based on figures as of July 1, 2014.

The SBTCI enables business leaders, government policy makers 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 Tax Foundation designed the index to show how well states structure their tax systems and provide a road map for improvement.

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

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

Why are these states in the top ten? For some, it's the absence of one of the major taxes, but there are exceptions even here.

From The Tax Foundation:
"...there are several states that do without one or more of the major taxes: The corporate tax, the individual income tax, or the sales tax.

Wyoming, Nevada, and South Dakota have no corporate or individual income tax.

Alaska has no individual income or state-level sales tax.

Florida has no individual income tax.

New Hampshire and Montana have no sales tax.

But this does not mean that a state cannot rank in the top ten while still levying all the major taxes. Indiana and Utah, for example, have all the major tax types, but levy them with low rates on broad bases."

Conversely, the 10 states with the lowest rankings (highest taxes) are:

41. Iowa
42. Connecticut
43. Wisconsin
44. Ohio
45. Rhode Island
46. Vermont
47. Minnesota
48. California
49. New York
50. New Jersey.

The Tax Foundation offers New Jersey as an example of why a state ends up in the bottom ten: "New Jersey suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country."

They do report on one notable "success story" in the 2015 edition. North Carolina, which was ranked in the bottom 10 in 44th place a year ago, moved up to a 16th place ranking.

Learn more about why North Carolina moved up the ranks so dramatically, and see the full state list, here.

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