Although the literature has largely congealed around a general consensus that taxes are a substantial factor in the decision-making process for businesses, disputes remain, and some scholars are unconvinced. The large number of studies permitted Bartik to take a different state income tax rates approach from the other authors. Instead of dwelling on the results and limitations of each individual study, he looked at them in the aggregate and in groups.

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Similarly, Moody and Warcholik found that in 2000, 19.9 million cases of beer, on net, moved from low- to high-tax states. This amounted to some $40 million in sales and excise tax revenue lost in high-tax states. When we measure all these taxes together, experts at WalletHub term it the ”tax burden.” It’s a clear way to see how much of your hard-earned money sticks with you after taxes. Here’s a look at states where residents’ wallets feel the pinch of taxes the most, and where they can breathe a bit easier. A new study by WalletHub revealed that residents of New York state are burdened by taxes the most among the 50 states, while Alaska residents have the lowest tax burden. Residents of New York state are burdened by taxes the most, while Alaska residents have the lowest tax burden, a WalletHub study found.

Property Taxes

New Jersey may be known as the Garden State, but it could also be infamous for its income tax rates. In fact, New Jersey ranks 49th out of all states when it comes to their tax system. Taxes on capital stock, tangible and intangible property, inventory, real estate transfers, estates, inheritance, and gifts are also included in the property tax component of the Index. The states that score the best on property tax are Delaware, New Mexico, Idaho, North Dakota, Indiana, Ohio, Nevada, Wisconsin, and Pennsylvania. These states generally have low property tax rates, measured as a percentage of income. They also avoid distortionary taxes like estate, inheritance, gift, and other wealth taxes.

#1 South Carolina

The heavy weighting of tax collections is due to their importance to businesses and individuals and their increasing size and visibility to all taxpayers. Tax collections as a percentage of personal income forms an effective rate that gives taxpayers a sense of how much of their income is devoted to property taxes. The rate subindex, as before, consists of the effective property tax rate index and the capital stock tax index. We now use property taxes paid as a percentage of personal income as the sole measure of the effective property tax burden.

• This variable assesses the degree to which pass-through businesses are subject to reduced after-tax return on investment as net income rises.
• The average house price in Nevada was $443,203 in 2024, compared to an average house price of $773,362 in California and $394,728 in Florida, according to Norada, a real estate investors’ site.
• These interactions provide a more precise estimate of the total tax burden on different types of firms.
• Connecticut has a 3% income tax rate, making it one of the states with relatively low income tax rates.

When are state taxes due?

Because gross receipts taxes inherently preclude the possibility of carrying net operating losses backward or forward, the Index treats states with statewide gross receipts taxes as having the equivalent of no NOL carryback or carryforward provisions. The carryforward provisions are more important in the federal tax code and thus weighted more heavily (80 percent) than the carryback provisions (20 percent) on the Index. To determine the residents with the biggest tax burdens, WalletHub compared the 50 states based on the cost of three types of taxes—property taxes, individual income taxes, and sales and excise taxes—as a share of total personal income in the state. On the other end of the spectrum, states with higher income tax rates can impose a more substantial financial burden. California, for instance, levies a 1% income tax rate, while New York and Michigan have rates of 4% and 4.25%, respectively.

The corporate income tax rate also declined from 7 to 6.5 percent, though this did not improve the state’s rank on the corporate component. Another important reason individual income tax rates are critical for businesses is the cost of labor. Labor typically constitutes a major business expense, so anything that hurts the labor pool will also affect business decisions and the economy. Complex, poorly designed tax systems that extract an inordinate amount of tax revenue reduce both the quantity and quality of the labor pool. This is consistent with the findings of Wasylenko and McGuire,21 who found that individual income taxes affect businesses indirectly by influencing the location decisions of individuals.

State Tax Competitiveness Index

• South Carolina has a 0% income tax rate, ranking it among the states with the lowest income tax rates.
• Remember to examine all tax implications, including sales, property, and other state-specific taxes and fees.
• CPA Practice Advisor has products that deliver powerful content to you in a variety of forms including online, email and social media.
• Following the federal treatment of NOLs, states entered FY 2025 with more favorable carryforward provisions (allowing carryforwards for up to an unlimited number of years) compared to carryback provisions (limited to a maximum of three years).
• The historic tables, however, have been updated to account for retroactive changes.
• Residents of Virginia, for example, generally have until May 1 to file their state returns.

The fees are spent contributing to the cost of processing passport applications, consular support overseas, including for lost or stolen passports, and the cost of processing British citizens at UK borders. The highest rating of the three went to Zen Internet, which secured a customer score of 77% – its contract price promise also means customers’ deals will not be hiked mid-contract. The economic inactivity rate for people aged 16 to 64 years was estimated at 21.5%.

It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs..” This provision is set to expire in 2027 and has already started to phase out. Sixteen states follow the federal government in offering the 60 percent write-off of eligible property, while three offer “bonus depreciation” short of the federal amount. Oklahoma and Mississippi are the only two states that have transitioned to permanent full expensing.

Additionally, the rate subindex now accounts for effective tax burdens as estimated by the US Department of Labor. We are using two variables—employer contribution rates as a percentage of taxable wages and total wages—as part of our actual UI tax rate assessment. States with relatively low values for these variables (e.g., Alabama or Virginia) do not overburden employers with high effective UI tax rates, unlike states with relatively high values (e.g., Hawaii and Pennsylvania). Tennessee slashed its gross receipts taxGross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation, costs of goods sold, and overhead costs.

• States that do not have a capital stock tax get the best scores in this subindex while the states that force companies to pay both score the worst.
• That’s why the Tax Foundation has a team of state tax experts whose primary purpose is to help educate policymakers and the public.
• The federal Tax Cuts and Jobs Act of 2017 (TCJA) increased the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government.
• For the purpose of this article, we’re going to take a look at the latest marginal individual income tax rates as of 2023.
• The first is in Washington and New Hampshire, which do not have taxes on wage income but apply various rates to interest and dividends (in the case of New Hampshire) or capital gains (in the case of Washington).

Their UI trust funds’ solvency is typically below the recommended level. Overall, the states with the least damaging UI taxes are Delaware, Arizona, Nebraska, Kansas, Missouri, Oklahoma, and North Carolina. Comparatively speaking, these states have rate structures with lower minimum and maximum rates and a wage base approximately at the federal level. In addition, they have simpler experience formulas and charging methods, and they have not complicated their systems with benefit add-ons and surtaxes. Also, their UI trust fund’s solvency is at or above the recommended level. In some states, different classes of property—like residential, commercial, industrial, and agricultural property—face distinct tax burdens, either because they are taxed at different rates or are exposed to different assessment ratios.

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