The Small Business and Entrepreneurship Council (SBE Council) recently published a report that ranks the states according to the costs of their tax systems for entrepreneurship and small business.
It found that the 10 best state tax systems for small businesses are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Ohio, 9) North Carolina, and 10) Colorado.
The bottom 10 are: 41) Connecticut, 42) Oregon, 43) New York, 44) Vermont, 45) Hawaii, 46) Iowa, 47) Minnesota, 48) Maine, 49) New Jersey, and 50) California.
“While there is much discussion in Congress and the Trump administration about making the federal tax system more competitive, these issues obviously reach down to state and local levels as well,” Raymond Keating, chief economist for SBE Council and author of the report, said.
For the study, SBE Council examined 26 different tax measures to create a tax score that allows the 50 states to be compared and ranked. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.
Since last year’s report, five states – Arizona, Indiana, New Hampshire, New Mexico, and North Carolina – have improved their tax climates by reducing their personal or corporate income tax rates. Other states – such as New Mexico and Tennessee – have scheduled changes that will improve their tax climates for entrepreneurship, business and investment in coming years.
However, Kansas, Maine and New York have made tax changes that have negatively impacted their tax climates.
“In the end, if the state’s tax burden is light on economic risk taking, then that will be good news for entrepreneurship, businesses, investment, economic and income growth, and job creation in each state,” Keating said.