Which State Has Worst Business Tax Climate?

New York’s business tax climate ranked 50th out of all 50 states this year according to the 2014 State Business Tax Climate Index, a report by the Tax Foundation.

“This year, New Jersey and New York are virtually tied for the worst business tax climate in the country,” Tax Foundation economist Scott Drenkard said. “New York has an opportunity to make beneficial reforms to its tax code this year with the creation of Governor Cuomo’s tax reform commission. In order to remain competitive with New York, New Jersey will have to vamp up their own tax reform efforts.”

The lowest ranked states in the 2014 index are Maryland (41), Connecticut (42), Wisconsin (43), North Carolina (44), Vermont (45), Rhode Island (46), Minnesota (47), California (48), New Jersey (49) and New York (50).

Wyoming won first place, followed by South Dakota (2), Nevada (3), Alaska (4), Florida (5), Washington (6), Montana (7), New Hampshire (8), Utah (9) and Indiana (10).

The State Business Tax Climate Index synthesizes data on over a hundred tax provisions for each state to give each state a single score. The states are then ranked so that each state’s ranking is relative to other states’ policies. A state’s ranking rises or falls based both on its own actions and on other states’ reforms.

In this year’s rankings, Texas fell to 11th, the state’s first drop out of the top 10. Virginia and Kentucky both fell three rankings to 26 and 27 respectively. Arizona jumped five rankings to 22, and Kansas jumped six rankings to 20.

Drenkard said 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.”

The states that improved did so because their tax codes became more neutral and closer to collecting revenue without unnecessarily distorting business decisions.

“The goal of the State Business Tax Climate Index is to start a conversation with policymakers about how their states fare against the rest of the country,” Drenkard said. “With this report, we’re asking: ‘how well is your tax code structured? Are businesses in your state spending too much time complying with onerous tax provisions? Are you double taxing things you shouldn’t?’”