One underappreciated advantage for attracting talent and minimizing costs is setting up shop in a business-friendly state. Higher-than-average tax rates, whether it’s for property, individual income, sales, corporate income or unemployment, take a big bite out of profits.
With no near end in sight for high inflation, now may be as good a time as any for companies to consider pulling up stakes and heading for a rosier spot. To get a better idea of which states offer businesses the most perks, consider the latest rankings from the Tax Foundation’s 2023 State Business Tax Climate Index.
‘Blue’ state blues for firms in coastal states
No stranger to the top of the list in recent years is the Garden State, New Jersey, followed closely by New York and California in 48th and 49th place respectively.
It isn’t just sky-high tax rates that make it tougher for businesses to get ahead in these states. New Jersey and other “states in the bottom 10 tend to have a number of afflictions in common: complex, non-neutral taxes with comparatively high rates,” says the Tax Foundation.
Blue states got a temporary shot in the arm via federal infrastructure and coronavirus relief funds starting in 2020. But long-term commitments to public employee pensions that can’t be met means trouble for businesses that choose to stay.
The Tax Foundation notes that property and unemployment insurance taxes are levied in every state, but several states eschew one or more of the three other major taxes: corporate income, individual income and sales tax.
However: “Indiana and Utah, for example, levy all the major tax types but do so with low rates on broad bases” and are ranked in the top 10 on this year’s list.
Who’s the best & who’s the worst?
Here are the 10 best states for businesses when it comes to taxes:
- South Dakota
- Florida (big perk: no individual income tax)
- New Hampshire
- North Carolina
And here’s the bottom 10:
- New Jersey
- New York
- Rhode Island