Small Business Tax Index 2015

From The Small Business and Entrepreneurship Council, April 15, 2015

When it comes to state and local taxes – as well as levies at the federal level – the direction that policy should be pointed is clear. Keep the overall tax burden low. Preferably, do no tax income at all. If a state ranks poorly on the “Small Business Tax Index,” then tiny changes will make little difference. While small steps are better than doing nothing and can stoke momentum for additional reform, substantial reforms and reductions will help poor-ranking states make huge leaps in their competitive standing. In the end, if the tax burden is light on economic risk taking, then that will be good news for entrepreneurship, businesses, investment, economic growth and job creation in each state.

The Small Business & Entrepreneurship Council’s “Small Business Tax Index 2015” ranks the states from best to worst in terms of the costs of their tax systems on entrepreneurship and small business. This year’s edition of the Index pulls together 23 different tax measures, and combines those into one tax score that allows the 50 states to be compared and ranked.

The 23 Tax Measures:

1. state’s top personal income tax rate,
2. state’s top individual capital gains tax rate,
3. state’s top tax rate on dividends and interest,
4. state’s top corporate income tax rate,
5. state’s top corporate capital gains tax rate,
6. any added income tax on SCorporations,
7. any added income tax on LLCs,
8. average local personal income tax rate,
9. whether or not the state imposes an alternative minimum tax on individuals,
10. whether or not the state imposes an alternative minimum tax on corporations,
11. whether or not the state’s personal income tax brackets are indexed for inflation,
12. the progressivity of the state’s personal income tax brackets,
13. the progressivity of the state’s corporate income tax brackets,
14. property taxes,
15. consumption-based taxes (i.e., sales, gross receipts and excise taxes),
16. whether or not the state imposes a death tax,
17. unemployment taxes,
18. whether or not the state has a tax limitation mechanism,
19. whether or not the state imposes an Internet access tax,
20. remote seller taxes,
21. gas tax,
22. diesel tax, and
23. wireless taxes.

The 15 best state tax systems are: 1) South Dakota, 2) Nevada, 3) Texas, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Colorado, 9) Ohio, 10) Alaska, 11) Arizona, 12) Indiana, 13) Michigan, 14) Utah, and 15) North Dakota.

The 15 worst state tax systems are: 36) Maryland, 37) Delaware, 38) Rhode Island, 39) Idaho, 40) Nebraska, 41) Connecticut, 42) Oregon, 43) Vermont, 44) Maine, 45) New York, 46) Iowa, 47) Hawaii, 48) Minnesota, 49) New Jersey, and 50) California.

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