2025 State Tax Competitiveness Index

Tax Foundation, October 31, 2024 (excerpt)

The Tax Foundation’s State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.

The 10 best states in this year’s Index are:

Wyoming
South Dakota
Alaska
Florida
Montana
New Hampshire
Texas
Tennessee
North Dakota
Indiana

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. South Dakota and Wyoming have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida and Texas have no individual income tax; and New Hampshire and Montana have no sales tax, with New Hampshire also only imposing a narrow tax on interest and dividend income.

This does not mean, however, that a state cannot rank well while still levying all the major taxes. Indiana, for example, levies all the major tax types, as do all the other states that rank 11th to 16th: Idaho, North Carolina, Missouri, Arizona, Michigan, and Utah.

The 10 lowest-ranked, or worst, states in this year’s Index are:

Massachusetts
Hawaii
Vermont
Minnesota
Washington
Maryland
Connecticut
California
New Jersey
New York

The states in the bottom 10 tend to have a number of issues in common: complex, nonneutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income tax in the country, and has one of the highest-rate individual income taxes. Additionally, the state has a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.

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Tax Foundation: Tax Competitiveness and Interstate Migration

LINK: Hawaii Tax Rates & Rankings | Tax Foundation