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Most and Least Business Friendly States


New Jersey's taxes are so high that the state is consistently one of the least friendly states for businesses. Wyoming, Nevada and Florida are among the friendliest.

There’s one thing business owners in New Jersey can count on: at least the state is consistent. Since 1977 the state has been of the top five states with the highest tax burden and is often one of the least business friendly states. And this year the Garden State’s tax climate for businesses ranked dead last, according to the Tax Foundation’s State Business Tax Climate Index.

The Foundation’s index is ranked by measuring each state against another, so those that top the list often don’t have one or more of the major taxes. Compare these with the bottom group, which have complex taxes and high rates.

"Even in our global economy, a state's stiffest and most direct competition often comes from other states," said Tax Foundation economist Mark Robyn, in a statement. "State lawmakers need to be aware of how their states' business climates match up to their immediate neighbors and to other states in their region."

Joining New Jersey as the worst states in the index are Iowa (41), Maryland (42), Wisconsin (43), North Caroline (44), Minnesota (45), Rhode Island (46), Vermont (47), California (48) and New York (49).

The most business friendly states are, in order, Wyoming, South Dakota, Nevada, Alaska, Florida, New Hampshire, Washington, Montana, Texas and Utah.

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.

There are some recent or proposed tax changes that aren’t reflected in the index’s 2012 ranking. Connecticut’s score will likely go down next year as its corporate income surcharge with increase to 20%, raising the statutory rate from 8.25% to 9%.

However, Delaware, Massachusetts, Michigan, Ohio, Oklahoma, Oregon and Pennsylvania are all expected to improve. West Virginia, as one of the few states to end the year with a budget surplus, will improve as well, dropping the corporate income tax rate from 8.5% to 7.75%.

And there is good news for New Jersey business owners, who can expect the climate to become a little friendlier. The state is reducing the minimum tax on S corporations and reducing restrictions on the ability of taxpayers to carry forward net operating losses. Depending on what happens in New York and California, New Jersey could actually see its overall ranking improve.

According to the Tax Foundation, New Jersey has the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax and the second-worst property tax.

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