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States with the Worst Business Tax Climates


Taxes are a certainty in life, but depending on which state you live, they can be much easier to bear for your business. Here are the 10 states with the worst business tax climates.

Taxes are a certainty in life, but depending on which state you live, they can be much easier to bear for your business. Thanks to The Tax Foundation’s annual report, you can know which states have the worst business climate.

While the 10 states with the worst business climate changed a little bit this year, the two worst states are in a virtual tie for last place, according to the 2014 State Business Tax Climate Index by The Tax Foundation.

The states in the bottom 10 all have complex, non-neutral taxes with comparatively high rates, while most of the best states are missing a major tax like corporate, individual income or sales. Special mention goes to Indiana and Utah, which both landed in the top 10 despite having all the major tax types — they simply levy them with low rates.

“The evidence shows that states with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth,” write Scott Drenkard and Joseph Henchman with The Tax Foundation. And yet, some states have tax system elements that harm the competitiveness of the state’s business environment.

The Tax Foundation ranked states based on five components: individual income tax, sales tax, corporate income tax, property tax and unemployment insurance tax. However, these five components are not weighted equally.

41. Maryland

2014 score: 4.49

2013 rank: 41

2013 score: 4.49

Individual income tax rank: 46

Sales tax: 8

Corporate tax rank: 15

Property tax rank: 41

Unemployment insurance tax rank: 40

Inner Harbor, Baltimore

Clearly, little has changed in Maryland year to year since not only did the state remain in the same spot, but it received the exact same score as it did in the 2013 index. Talk about unfavorable business climates, though: global security company Northrop Grumman left Maryland for Virginia’s better business climate in 2010.

42. Connecticut

2014 score: 4.47

2013 rank: 43

2013 score: 4.44

Individual income tax rank: 33

Sales tax: 32

Corporate tax rank: 35

Property tax rank: 49

Unemployment insurance tax rank: 23


Connecticut’s property tax was the second worst. According to The Tax Foundation, Connecticut has a high property tax rate and levies several wealth-based taxes. The per capita collections are $2,498. Meanwhile, Alabama had the lowest per capita collection at just $506.

43. Wisconsin

2014 score: 4.43

2013 rank: 42

2013 score: 4.47

Individual income tax rank: 43

Sales tax: 15

Corporate tax rank: 33

Property tax rank: 36

Unemployment insurance tax rank: 25


Wisconsin knows high taxes are an issue — the state has acknowledged that high taxes may be responsible for its low rate of job creation. The state is one of just nine that has an Alternative Minimum Tax on individuals.

44. North Carolina

2014 score: 4.35

2013 rank: 44

2013 score: 4.29

Individual income tax rank: 42

Sales tax: 47

Corporate tax rank: 29

Property tax rank: 30

Unemployment insurance tax rank: 7


While the state is ranked 44th in this edition of the index, it recently passed comprehensive reforms that will move it to as high as 17th as these reforms take effect, according to The Tax Foundation.

45. Vermont

2014 score: 4.14

2013 rank: 46

2013 score: 4.20

Individual income tax rank: 45

Sales tax: 13

Corporate tax rank: 42

Property tax rank: 48

Unemployment insurance tax rank: 22


Vermont’s top income tax rate of 8.95% is the fourth worst in the country. Plus, it has a high property tax rate and levies several wealth-based taxes, which caused it to score so poorly on that component.

46. Rhode Island

2014 score: 4.14

2013 rank: 47

2013 score: 4.16

Individual income tax rank: 36

Sales tax: 27

Corporate tax rank: 43

Property tax rank: 46

Unemployment insurance tax rank: 50


Rhode Island’s high corporate tax rate of 9% is one of the worst in the country, especially considering some states don’t even levy one. Plus, it’s 7% sales tax ties it with four other states for the second-highest in the country.

47. Minnesota

2014 score: 4.06

2013 rank: 45

2013 score: 4.26

Individual income tax rank: 47

Sales tax: 35

Corporate tax rank: 44

Property tax rank: 33

Unemployment insurance tax rank: 41

Downtown Minneapolis

Minnesota slid badly year to year and actually had the largest negative change in score. The reason why? The state enacted a package of tax changes that includes a retroactive hike in the individual income tax rate.

48. California

2014 score: 3.76

2013 rank: 48

2013 score: 3.68

Individual income tax rank: 50

Sales tax: 41

Corporate tax rank: 31

Property tax rank: 14

Unemployment insurance tax rank: 16


Despite getting a slightly better score, California remained in the same spot in the 2014 index. As California residents likely know, the Golden State has the highest top income tax rate of 13.3%. The state also knows how big of an effect a high corporate tax rate can have: in 2005 Intel built a multi-billion dollar chip-making facility in Arizona because it had a more favorable corporate tax income system. Arizona’s 2014 corporate tax ranked 26 compared to California’s 31.

49. New Jersey

2014 score: 3.45

2013 rank: 49

2013 score: 3.51

Individual income tax rank: 38

Sales tax: 46

Corporate tax rank: 41

Property tax rank: 50

Unemployment insurance tax rank: 32


Gov. Chris Christie has vowed to keep New Jersey out of last place, but he’s only just barely doing so. The state’s corporate tax slipped a spot from the previous year and its top income tax rate of 8.97% is the fourth worst in the country. Plus, the worst state is breathing right on New Jersey’s neck, waiting to get out of the bottom…

50. New York

2014 score: 3.45

2013 rank: 50

2013 score: 3.43

Individual income tax rank: 49

Sales tax: 38

Corporate tax rank: 25

Property tax rank: 45

Unemployment insurance tax rank: 45


New York actually received the same score as New Jersey, and while New York has a more favorable corporate tax ranking, its individual income tax suffers from high rates and narrow bases. And if New York makes even slight improvements, then it has the opportunity to beat New Jersey and put the Garden State at the bottom of the pack, again.

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