If you just paid your business taxes, you might wonder which states are the most tax-friendly to small business (i.e., where you could get a better break). Think tank The Tax Foundation has released its annual assessment of the best (and worst) states for small business when it comes to taxes.
The Tax Foundation’s 2013 State Business Tax Climate Index ranked the states using 118 different measures of tax-friendliness. Overall, the survey says the states with the best climates for small business typically generally lower personal and corporate income tax rates, as well as simpler tax codes.
The 10 best states in this year’s Index are:
- South Dakota
- New Hampshire
The absence of a major tax is a dominant reason many of these states ranked so highly, the Foundation says. Property taxes and unemployment insurance taxes are levied in every state, but several states 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; and New Hampshire and Montana have no sales tax.
The 10 lowest ranked, or worst, states in this year’s Index are:
- North Carolina
- Rhode Island
- New Jersey
- New York
Despite moderate corporate taxes, New York scores at the bottom this year by having the worst individual income tax, the sixth-worst unemployment insurance taxes, and the sixth-worst property taxes. The states in the bottom 10 all suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
View the full report here.