Report: Best and worst states for business taxes

Wyoming, South Dakota and Nevada are among the 10 best states for taxes on business, while California, New York and New Jersey are among the 10 worst, according to a new report, State Business Tax Climate Index, from the Washington-based Tax Foundation. The annual report ranks states by comparing dozens of tax provisions to show how each state’s taxes compare.

The 10 best states, according to the report, from one to 10 are: Wyoming, South Dakota, Nevada, Alaska, Florida, New Hampshire, Washington, Montana, Texas and Utah. The best states do not have a “major tax,” the report said, such as a corporate tax, individual income tax or sales tax. “The lesson is simple: a state that raises sufficient revenue without one of the major taxes will, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal,” the report said.

The 10 worst states, from 41 to 50 are: Iowa, Maryland, Wisconsin, North Carolina, Minnesota, Rhode Island, Vermont, California, New York and New Jersey. The bottom 10 states have “complex, non-neutral taxes with comparatively high rates,” the report said.

States moving up in the rankings since last year include Maryland, which rose to 42 from 44 after the state’s “millionaire’s tax” on high-income earners expired. Rhode Island improved to 46 from 47 after implementing individual income tax reform. Illinois’ rank dropped the most – 12 places from 16 to 28 – after major income and corporate tax increases, according to the report.

“Even in our global economy, a state’s stiffest and most direct competition often comes from other states,” Tax Foundation economist Mark Robyn said in a statement. “State lawmakers need to be aware of how their states’ business climates match up to their immediate neighbors and to other states in their region.”

View the complete 2012 State Business Tax Climate Index.