Tax Foundation Ranks State's on Business-Friendliness

The new study, “State Business Tax Climate Index,” ranks the 50 states on how “business friendly” their tax systems are, providing a roadmap for state lawmakers concerned with keeping their states tax-competitive.

The goal of the index is to focus lawmakers on good-tax fundamentals in their states, rather than short-term tax abatements and exemptions designed to temporarily lure high-profile companies, baseball teams, and auto plants from other states.

Generally the index rewards tax codes that are neutral, have low and flat rates, are simple and transparent, avoid double taxation, and have statutory or constitutional restraints that keep tax burdens low over time. See Tables 1 and 2 here for the overall results.

The ten states that began 2004 with the most business-friendly tax systems are: South Dakota, Florida, Alaska, Texas, New Hampshire, Nevada, Wyoming, Colorado, Washington and Oregon.