Here are the Best States When it Comes to Taxes

 

The United States tax system is about as convoluted as it comes. There are federal taxes, state taxes, local taxes, sales taxes, property taxes, etc. Periodically, someone comes along and makes an attempt to simplify the system but entrenched interests, and loopy politicians, make change a herculean task.

In 2017, during the Trump administration, taxes were lowered for certain segments including corporate taxes thus making the US more competitive on a global basis. For individuals, it was a bit more difficult to discern but the elimination of the deduction for state and local taxes from federal taxes (SALT) meant that many affluent individuals saw their taxes go up. This is something the Biden administration is attempting to reverse as key Democrat states, like New Jersey and New York, were hit the hardest with the SALT removal.

The Tax Foundation, a non-partisan – independent group that has been tracking taxes since 1937, recently published its annual “State Business Tax Climate Index.” This document highlights the states where taxes are more competitive, thus enabling policymakers the ability to improve their state standing. Of course, this information is also key for individuals interested in living in lower-tax states or more business-friendly regions.

To quote the document:

“The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. Nevada, South Dakota, and Wyoming have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida and Tennessee have no individual income tax; and New Hampshire and Montana have no sales tax.

This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases.”

So which states fared the worst in this year’s report? New Jersey, New York, and California take first, second and third place, respectively, for states taking more of your money. The top ten high tax states are as follows:

41. Hawaii

42. Louisiana
43. Vermont
44. Arkansas
45. Minnesota
46. Maryland
47. Connecticut
48. California
49. New York
50. New Jersey

So who are the winners on this year’s tax list? Wyoming, South Dakota, and Alaska take the prize.

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Montana
  6. New Hampshire
  7. Nevada
  8. Tennessee
  9. Indiana
  10. Utah

Of course, there are other items people and businesses consider when relocating to a state, but high taxes may explain at least part of the below chart that shows people fleeing some of the bad tax states.

 

In reviewing the data, one must wonder why politicians that are losing out don’t do more to remain competitive. The  Tax Foundation notes that multiple states are working on reducing taxes – like Arizona – a state that is in the process of reforming its individual income tax beginning in 2022. In the tax year 2022, Arizona will delete its two highest individual income tax brackets and the two remaining rates will be reduced from 3.34 to 2.98 percent and from 2.59 to 2.55 percent, respectively. Other states are looking to make similar moves.

Contrast this to New York, a state that counterintuitively raised taxes on the wealthy earlier this year. This may end up costing the Empire state more than money as population loss means fewer seats in the House of Representatives.

You can download the 2022 State Business Tax Climate Index here.

Sponsored
Sponsored Links by DQ Promote

 

 

Send this to a friend