Special Report

Most and Least Tax-Friendly States for Business

5. Florida
> State sales tax rate: 6.00% (tied-16th highest)
> Property taxes collected per capita: $1,369 (22nd highest)
> Unemployment rate: 7.2% (21st highest)
> Top income tax rate: N/A

The five most tax-friendly states, including Florida, received a perfect score for their individual income tax systems, as all of them have no income tax. Florida was ranked better than the vast majority of states for its sales tax policies as well. Despite this, its excise taxes are exceptionally high. Gasoline and diesel, for example, are both taxed at well more than 30 cents per gallon, among the highest rates nationwide. Florida and just seven other states were penalized for levying an alternative minimum tax (AMT) on corporations. While the tax was designed to ensure a minimum tax was paid by all businesses each year, the tax adds complexity and has been shown to be inefficient, according to The Tax Foundation. However, Florida was ranked nearly the best for unemployment insurance tax policy.

4. Alaska
> State sales tax rate: None
> Property taxes collected per capita: $2,077 (8th highest)
> Unemployment rate: 6.5% (18th lowest)
> Top income tax rate: N/A

Individual income is not taxed in Alaska. The state is also one of just a few with no state sales tax. Excise taxes on beer and spirits are among the nation’s highest, however, at $1.07 and $12.80 per gallon, respectively. Gasoline and diesel, on the other hand, are each only taxed at eight cents per gallon, lower than in every state except for Georgia. One reasons Alaska can levy such low taxes may be the role of the oil and gas industry. According to the Census Bureau, severance taxes — or taxes on the extraction of nonrenewable resources — accounted for more than 78% of the Alaska’s tax collections in 2013, by far the most of any state. Alaska is nearly the most tax-friendly state, but its economic output has floundered recently. The state’s GDP fell by an estimated 2.5% last year, the largest decrease in the nation.

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3. Nevada
> State sales tax rate: 6.85% (8th highest)
> Property taxes collected per capita: $1,109 (21st lowest)
> Unemployment rate: 9.8% (the highest)
> Top income tax rate: N/A

Like a majority of tax-friendly states, there is no individual income tax in Nevada. Some states make up for this lost revenue through taxes on corporations. Nevada, however, also has no corporate income tax, nor does it levy a gross receipts tax, one of only three states where neither tax is implemented. However, Nevada scored poorly for its sales tax policy, with a state sales tax rate of 6.85%, higher than in all but a handful of states. The state’s economy has also struggled to recover from the recession. The unemployment rate was 9.8% last year, considerably better than the year before, but still the highest nationwide.

2. South Dakota
> State sales tax rate: 4.00% (tied-7th lowest)
> Property taxes collected per capita: $1,196 (23rd lowest)
> Unemployment rate: 3.8% (2nd lowest)
> Top income tax rate: N/A

Like just a few other states, South Dakota does not levy a corporate income tax or a no gross receipts tax. Additionally, it is among the few states that does not tax income. The state’s excise taxes are moderately high across the board, however. The Tax Foundation also penalized South Dakota applyings its sales tax for many many business inputs. Ideally, the group notes, sales taxes would only be levied on finished products for sale, since otherwise a sale would effectively be taxed multiple times. The statewide sales tax of just 4%, however, was one of the lowest sales tax rates in the country. Although South Dakota did not receive a top score for its property tax system, residents paid only 2.7% of typical income on property taxes, one of the lower proportions nationwide.

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1. Wyoming
> State sales tax rate: 4.00% (tied-7th lowest)
> Property taxes collected per capita: $2,173 (6th highest)
> Unemployment rate: 4.6% (6th lowest)
> Top income tax rate: N/A

Wyoming is the most tax-friendly state for business in the nation, according to The Tax Foundation. The state received perfect scores for its corporate and individual income tax policies, and ranked relatively well for its sales tax policies. Wyoming is one of only three states that do not levy a corporate income or gross receipts tax. It is also among the seven states with no income tax. General sales were taxed at just 4% in Wyoming, and excise taxes were frequently among the nation’s lowest in the state. Beer, for example, is taxed at just 2 cents per gallon, among the lowest rates nationwide. Also, while liquor sales are state-controlled, spirits are sold at competitive prices, meaning there is no effective tax on such sales. Like a majority of tax-friendly states, the unemployment rate in Wyoming is particularly low, at just 4.6% last year, versus a national rate of 7.4%.

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