What do Wyoming and New Jersey have in common? From a state business tax climate, nothing, according to the Tax Foundation’s 2012 State Business Tax Climate Index. Wyoming tops the states with the best state business tax climate, with its lack of a corporate or individual income tax. New Jersey, on the other hand, scored at the bottom by having the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax.
Rounding out the Tax Foundation’s top ten are: South Dakota; Nevada, Alaska, Florida, New Hampshire; Washington; Montana’ Texas; and Utah. The nine other worst states, in descending order, are: Iowa; Maryland; Wisconsin; North Carolina; Minnesota; Rhode Island; Vermont; California; and New York.
“The lesson is simple,” wrote study author Mark Robyn, “A state that raises sufficient revenue without one of the major taxes, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal.”
The Department of Labor, Robyn noted, found that most mass job relocations are from one U.S. state to another, rather than to an overseas location. Foe example, in 2005, California-based Intel opted to build its multi-billion dollar chip-making facility in Arizona, which offered a favorable corporate income tax system. In 2010, Northrup Grumman chose Virginia over Maryland for its headquarters because of its better business tax climate.
Scanning the top 10 states, Wyoming, Nevada, South Dakota, and Alaska have no individual income tax. These states also have no corporate tax, Among the country’s most favorable state business tax climates, the index cited the states without a corporate tax (Wyoming, Nevada, South Dakota), individual income tax (Wyoming, Alaska, Florida), or sales tax (Alaska, New Hampshire, and Montana).
At the other end of the scale, Rhode Island has the worst unemployment tax system and fifth-worst property tax system, the Index found. Maryland rose two notches to 42 due mostly to the expiration of the state’s “millionaire tax” on high-income earners.
Illinois suffered the Index’s biggest drop in 2011, falling 12 places to 28.
The Index represents the tax climate of each state as of July 1, the first day of the standard 2012 state fiscal year.