2022 State Revenue Tax Rating


This week’s map examines the rating of states on the private revenue tax part of our 2022 State Enterprise Tax Local weather Index, The non-public revenue tax is essential for companies as a result of the state taxes sole proprietorships, partnerships, and generally restricted legal responsibility firms (LLCs) and S firms underneath the private revenue tax code. Nevertheless, conventional C firms are additionally not directly affected by private revenue tax, as this tax impacts people’ location selections, probably affecting the state’s labor provide, and better private revenue taxes improve the value of labor. We do. States with gross receipts tax additionally prolong this to pass-through companies aside from C firms, and in addition account for this part. index,

States which have scored effectively on indexThe non-public revenue tax part of the U.S. usually consists of a flat, low-rate revenue tax with few deductions and exemptions. They have a tendency to guard married taxpayers from being taxed extra closely when submitting collectively than when submitting as two single people. As well as, states carry out higher indexParticular person revenue tax elements of in the event that they index their brackets, deductions and exemptions for inflation, which avoids unlawful tax will increase.

States with an ideal rating on the private revenue tax part (Alaska, Florida, South Dakota, and Wyoming) haven’t any private revenue tax and no payroll tax aside from an unemployment insurance coverage tax. The subsequent highest scoring states are Nevada, Texas, Washington, Tennessee and New Hampshire. Nevada taxes wage revenue at a decrease charge underneath the state’s amended enterprise tax however doesn’t tax funding revenue. New Hampshire taxes curiosity and dividend revenue however not wage revenue. Tennessee, Texas, and Washington don’t tax wage revenue, however don’t obtain an ideal rating on this part as a result of they apply their gross receipts tax to S firms, which, in most states, are taxed underneath the private revenue tax code. Will go (Washington and Texas additionally apply these to restricted legal responsibility firms.) Different states that rating effectively on the private revenue tax part are Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, and Utah, as a result of all of them have There is just one low tax charge.

States that rating poorly on this part are inclined to have excessive tax charges and really progressive bracket buildings. They usually fail to index their brackets, exemptions and deductions for inflation, don’t enable deduction of international or different state taxes, penalize married {couples} submitting collectively, particular person revenue tax codes. LLCs and S firms don’t incorporate underneath the U.S. (as an alternative of being taxed as C firms), and will incur an alternate minimal tax (AMT). The worst performing states on this yr’s private revenue tax part are New York, California, New Jersey, Connecticut and Hawaii.

Excessive marginal charges adversely have an effect on labor manufacturing and funding, and may have an effect on location decision-making, particularly in an age of elevated mobility, the place it’s tough for people to seek out jobs with out jeopardizing their present jobs or the scope of their search. Simple to maneuver with out limiting. new one.

Click on right here to view an interactive model of the person revenue tax rankings of states, after which click on in your state to see how its tax system compares on the regional and nationwide stage.

To see whether or not your state’s private revenue tax construction has moved up or down in rank lately, take a look at the desk beneath.

private revenue tax part of State Enterprise Tax Local weather Index (2019-2022)
State 2019 rank 2020 rank 2021 rank 2022 Rank Change from 2021 to 2022
alabama 31 31 29 27 2
alaska 1 1 1 1 0
Arizona 19 17 18 18 0
Arkansas 40 40 42 39 3
california 49 49 50 49 1
Colorado 13 13 13 14 -1
Connecticut 43 45 47 47 0
Delaware 44 44 44 44 0
Florida 1 1 1 1 0
Georgia 37 36 36 35 1
ethereal 47 47 46 46 0
idaho 23 25 24 20 4
Illinois 14 14 12 13 -1
Indiana 15 15 14 15 -1
Iowa 42 41 40 38 2
Kansas 21 22 21 22 -1
Kentucky 17 18 17 17 0
louisiana 35 35 35 34 1
I 25 20 22 23 -1
Maryland 45 43 45 45 0
Massachusetts 1 1 1 1 16 1 1 5
Michigan 12 12 1 1 12 -1
Minnesota 46 46 43 43 0
Mississippi 28 28 27 25 2
Missouri 27 23 20 21 -1
montana 22 24 23 24 -1
Nebraska 30 30 30 29 1
Nevada 5 5 5 5 0
new Hampshire 9 9 9 9 0
new jersey 50 50 49 48 1
new Mexico 26 27 26 36 -10
New York 48 48 48 50 -2
North Carolina 16 16 15 16 -1
North Dakota 18 19 25 26 -1
ohio 41 42 41 41 0
Oklahoma 32 32 31 30 1
Oregon 38 39 38 42 -4
Pennsylvania 20 21 19 19 0
Rhode Island 24 26 32 31 1
South Carolina 34 34 34 33 1
South Dakota 1 1 1 1 0
Tennessee 8 8 8 6 2
Texas 6 6 6 7 -1
Utah 10 10 10 10 0
Vermont 36 38 39 40 -1
Virginia 33 33 33 32 1
Washington 6 6 6 7 -1
West Virginia 29 29 28 28 0
Wisconsin 39 37 37 37 0
Wyoming 1 1 1 1 0
District of Columbia 47 47 48 48 0

Observe: 1 rank is the most effective, 50 is the worst. All marks are for the monetary yr. DC’s rating and rank haven’t any bearing on different states.

Supply: Tax Basis.



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