Study shows which states have business-friendly tax codes and which don’t, how does yours fare?
February 27, 2006: 6:50 AM EST
NEW YORK (CNNMoney.com) – Wyoming tops the list of states with the most business-friendly tax system, according to a report released Monday.
South Dakota, Alaska, Florida, Nevada, New Hampshire, Texas, Delaware, Montana and Oregon round out the top 10, according to the Tax Foundation’s State Business Tax Climate Index.
Businesses face the least hospitable business tax climate in New York, followed by New Jersey, Rhode Island, Ohio, Vermont, Maine, Kentucky, Nebraska, Iowa and Arkansas.
The Tax Foundation’s index rewarded states with more neutral tax codes that have low, flat tax rates that apply to all businesses.
The Tax Foundation penalized states with multi-rate corporate and individual income taxes, above-average sales tax rates that don’t exempt business-to-business purchases, complex, high-rate unemployment tax systems and high effective property tax rates as well as a host of other wealth-based taxes.
The survey evaluated each state based on five elements of its tax system: the principal business tax, usually the corporate income tax; the individual income tax, used by many small businesses; the sales or gross receipts tax; the unemployment insurance tax; and the state’s system for taxing assets, principally the property tax.
Wyoming was most favorable, in part, because the state has no corporate income or individual income tax.
New York, on the other hand, has the highest individual income tax in the country, in addition to the one of the highest unemployment taxes.
The Tax Foundation, based in Washington, D.C. is a nonpartisan, nonprofit policy research group that advocates, among other things, tax simplification.