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Financial Planning > Tax Planning

10 Worst States for Business Taxes

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The Tax Foundation released on Wednesday the results of its 2014 State Business Tax Climate Index. This is the 10th iteration of the index from the Tax Foundation, a non-partisan research firm.

A state’s position on the index is not just a question of total taxes paid. For a state’s tax climate to be considered good, the Tax Foundation looked at how many major taxes were levied on companies doing business there. States that either forgo major taxes or keep rates low were more likely to appear in the top 10.

However, states’ position in the index is also relative. One state’s ranking might be higher simply because another state’s tax code is more burdensome. “Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region and even globally,” according to the report.

(Check out 10 Best States for Business Taxes on ThinkAdvisor.)

“The states that lost ground this year usually did so because they changed policy in a way that makes the tax code more complex, burdensome or economically harmful,” Scott Drenkard, Tax Foundation economist, said in a statement. “By contrast, the states that improved did so because they are moved closer to a tax code that collects revenue without unnecessarily distorting business decisions. Their tax codes became more neutral.”

The Tax Foundation rated states based on five tax categories. Each category was weighted differently based on how likely each component is to change; those with greater variability have more weight.

  • Individual income tax: 32.4%
  • Sales tax: 21.5%
  • Corporate tax: 20.2%
  • Property tax: 14.4%
  • Unemployment insurance tax: 11.5%

Baltimore Inner Harbor

10. Maryland

  • Corporate Tax: 15
  • Individual Income Tax: 46
  • Sales Tax: 8
  • Unemployment Insurance Tax: 40
  • Property Tax: 41

Capitol Building, Hartford, Conn.

9. Connecticut

  • Corporate Tax: 35
  • Individual Income Tax: 33
  • Sales Tax: 32
  • Unemployment Insurance Tax: 23
  • Property Tax: 49

Wisconsin State Capitol.

8. Wisconsin

  • Corporate Tax: 33
  • Individual Income Tax: 43
  • Sales Tax: 15
  • Unemployment Insurance Tax: 25
  • Property Tax: 36

Raleigh, N.C., skyline.

7. North Carolina

  • Corporate Tax: 29
  • Individual Income Tax: 42
  • Sales Tax: 47
  • Unemployment Insurance Tax: 7
  • Property Tax: 30

Ski resort in Killington, Vt.

6. Vermont

  • Corporate Tax: 42
  • Individual Income Tax: 45
  • Sales Tax: 13
  • Unemployment Insurance Tax: 22
  • Property Tax: 48

Castle Hill Lighthouse in Newport, RI.

5. Rhode Island

  • Corporate Tax: 43
  • Individual Income Tax: 36
  • Sales Tax: 27
  • Unemployment Insurance Tax: 50
  • Property Tax: 46

Minnesota State Capitol building in Saint Paul.

4. Minnesota

  • Corporate Tax: 44
  • Individual Income Tax: 47
  • Sales Tax: 35
  • Unemployment Insurance Tax: 41
  • Property Tax: 33

Aerial view of San Francisco and Golden Gate Bridge.

3. California

  • Corporate Tax: 31
  • Individual Income Tax: 50
  • Sales Tax: 41
  • Unemployment Insurance Tax: 16
  • Property Tax: 14

View of Jersey City from Liberty State Park.

2. New Jersey

  • Corporate Tax: 41
  • Individual Income Tax: 48
  • Sales Tax: 46
  • Unemployment Insurance Tax: 32
  • Property Tax: 50

The Statue of Liberty and the New York skyline.

1. New York

  • Corporate Tax: 25
  • Individual Income Tax: 49
  • Sales Tax: 38
  • Unemployment Insurance Tax: 45
  • Property Tax: 45


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