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The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates. The 10 lowest-ranked, or worst, states in this year’s Index are: Indiana and Utah, for example, levy all the major tax types but do so with low rates on broad bases. This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes.

Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding.Įs) 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. Nevada, South Dakota, and Wyoming have no corporate or individual income tax (though Nevada imposes gross receipts tax A gross receipts tax is a tax applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. Many governments exempt goods like groceries base broadening, such as including groceries, could keep rates lower. , or the sales tax A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions.

Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. imposes a progressive income tax where rates increase with income. , the individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. and help fund schools, roads, police, and other services.Įs and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax A corporate income tax (CIT) is levied by federal and state governments on business profits. Property taxes are the single largest source of state and local revenue in the U.S.

Property tax A property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. The absence of a major tax is a common factor among many of the top 10 states. The 10 best states in this year’s Index are: While there are many 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 Tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.įoundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. Launch Our Interactive Tool Executive Summary