The Most Tax-Friendly States For Business

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10. Indiana
> Taxes collected per capita: $2,292 (22nd lowest)
> Unemployment: 8.1% (13th highest)
> Corporate taxes collected per capita: $110 (24th lowest)
> Sales tax rate: 7.00% (tied-2nd highest)

The Tax Foundation rated Indiana’s business tax climate as one of the best in the U.S. after it recently-lowered corporate income tax rate, as well as its low individual income tax rates. As a result, Indiana replaced Texas among the 10 most tax-friendly states for businesses. Additionally, Indiana eliminated its inheritance tax, which also improved its score. The state’s unemployment rate was 8.1% as of August, above the nationwide rate of 7.3%. Still, it was quite an improvement from its recent peak of 10.8% in May 2009, when the recession battered the state’s automotive and construction industries.

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9. Utah
> Taxes collected per capita: $1,958 (13th lowest)
> Unemployment: 4.7% (7th lowest)
> Corporate taxes collected per capita: $89 (19th lowest)
> Sales tax rate: 5.95% (25th lowest)

Utah was awarded some of the top grades in the nation for its property and corporate tax policies, receiving the fourth- and fifth-best scores, respectively, out of all 50 states. Also, Utah’s corporate income tax rate of only 5% is one of the lowest in the nation. As of August, the unemployment rate in Utah was only 4.7%, down from a peak of 8.4% in December 2009 and well-below the national jobless rate of 7.3%. The state’s abundant natural resources, including copper and oil and natural gas, and a vibrant tourism industry boost the economy.

8. New Hampshire
> Taxes collected per capita: $1,761 (8th lowest)
> Unemployment: 5% (9th lowest)
> Corporate taxes collected per capita: $443 (2nd highest)
> Sales tax rate: 0.00% (tied-the lowest)

New Hampshire has a high corporate tax burden, at 8.5% of income. The state collected more corporate income taxes in fiscal 2011 than any state but Alaska. However, the state has no sales tax and only a modest tax on interest and dividends. New Hampshire also offers landowners a nice break in the form of freezes on the assessed value of undeveloped land of a certain size. However, the state still received one of the worst property tax grades in the nation. Per capita collections in New Hampshire were among the highest in the nation, both in dollar terms and as a percent of income.

7. Montana
> Taxes collected per capita: $2,316 (23rd lowest)
> Unemployment: 5.3% (tied-11th lowest)
> Corporate taxes collected per capita: $125 (21st highest)
> Sales tax rate: 0.00% (tied-the lowest)

Montana offers taxpayers low individual income tax rates, a relatively low corporate income tax rate and no sales tax. Montana is among just five states with no general sales tax, although its cigarette and gasoline excise taxes are higher than the majority of states. Boeing, which operates a fabrication plant in Helena, was granted property tax abatements from the city in return for future development. Montana also has one of the nation’s lowest unemployment rates, at just 5.3%, down from a peak of 6.8% in the summer and fall of 2010.

6. Washington
> Taxes collected per capita: $2,566 (19th highest)
> Unemployment: 7.0% (tied-22nd lowest)
> Corporate taxes collected per capita: $0 (tied-the least)
> Sales tax rate: 6.50% (tied-9th highest)

Washington is one of seven states with no individual income tax, which helped improve its score. However, the sales tax, which totals 8.9% when adding in the average local rate, is among the highest in the nation. There have been calls in the past to enact a modest income tax so sales tax and property tax rates can be trimmed. So far, the idea has gone nowhere. The state is also one of just four with a gross receipts tax, under which revenues from corporate transactions are charged. According to the Tax Foundation, such charges often result in high effective tax rates for companies.