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IMA Tax Policy Blog

2017 State Business Tax Climate Index

Illinois’s 2016 Business Tax Climate Index Ranks 23rd . . .

84c1fe9b-bcdd-4478-a4a2-a5f340867c3dThe Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems, and provides a roadmap for improvement.

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

  1. Wyoming
  2. South Dakota
  3. Alaska
  4. Florida
  5. Nevada
  6. Montana
  7. New Hampshire
  8. Indiana
  9. Utah
  10. Oregon

The absence of a major tax is a common factor among many of the top ten 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. Wyoming, Nevada, and South Dakota have no corporate or individual income tax (though Nevada imposes gross receipts taxes); Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire, Montana, and Oregon have no sales tax.

This does not mean, however, that a state cannot rank in the top ten while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases.

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

  1. Louisiana
  2. Maryland
  3. Connecticut
  4. Rhode Island
  5. Ohio
  6. Minnesota
  7. Vermont
  8. California
  9. New York
  10. New Jersey

The states in the bottom 10 tend to have a number of shortcomings in common: complex, non-neutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance tax and an estate tax, and maintains some of the worst-structured individual income taxes in the country.

Illinois’s 2016 Business Tax Climate Index Ranks 23rd

Illinois ranks 23rd on the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes (36th), individual income taxes (10th), sales taxes (33rd), unemployment insurance taxes (39th), and taxes on property (45th), including residential and commercial property.

Illinois’s State and Local Tax Burden Ranks 5th

Illinois’s 2012 tax burden of 11 percent ranks 5th highest in the nation, and is above the national average of 9.9 percent. Illinois’s taxpayers pay $5,235 per capita in state and local taxes.

Illinois’s Individual Income Tax System

Illinois’s individual income tax system consists of a flat rate of 3.75 percent. That rate ranks 40th highest among states levying an individual income tax. Illinois’s state and local tax collections per person were $1,283 in 2013, which ranked 10th highest nationally.

Read The Full Report Here

2017 State Index PDF Download

Source: The Tax Foundation