Every year the Tax Foundation publishes its climate index on the business tax environment of all 50 states. Despite a challenging macroeconomic environment, the “2022 State Business Tax Climate Index” has arrived, and the results always provide for a lively discussion.

This annual publication gives policymakers, business leaders, and everyday taxpayers an easy-to-digest guide to gauge the country’s individual tax systems. The overall amount of tax collected per state is not the focus. Instead, the index centers on how well states structure their specific systems and subsequently offers suggestions for improvement. 

According to the index, all states share two commonalities – the prevalence of property and unemployment insurance taxes. The differences occur with the three major US taxes (corporate income, individual income, and sales tax). Some states have all three, while some only feature one. For example, South Dakota and Wyoming have no individual income or corporate tax, while Tennessee and Florida have eschewed just their individual income tax. The permutations are endless as the top 10 clearly demonstrates.   

10. Utah

• Individual tax rate – 4.85% (flat) 
• Corporate income tax – 4.85%
• Sales tax rate – 6.10% 

9.   Indiana

• Individual tax rate – 3.23% (flat) 
• Corporate income tax – 4.90%
• Sales tax rate – 7.00% 

8.   Tennessee

• Individual tax rate – None
• Corporate income tax – 6.50%
• Sales tax rate – 7.00% 

7.   Nevada

• Individual tax rate – None
• Corporate income tax – None
• Sales tax rate – 6.85% 

6.   New Hampshire

• Individual tax rate – 5.00% (flat)
• Corporate income tax – 7.60%
• Sales tax rate – None

5.   Montana

• Individual tax rate – 1.00 – 6.75% (graduated)
• Corporate income tax – 6.75%
• Sales tax rate – None

4.   Florida

• Individual tax rate – None
• Corporate income tax – 5.50%
• Sales tax rate – 6.00%

3.   Alaska

• Individual tax rate – None
• Corporate income tax – 2.00 – 9.40% (graduated) 
• Sales tax rate – None

2.   South Dakota

• Individual tax rate – None
• Corporate income tax – None 
• Sales tax rate – 4.50%

1.   Wyoming 

• Individual tax rate – None
• Corporate income tax – None 
• Sales tax rate – 4.00%

Taxes matter to businesses, but so does access to labor. Not every state in the union could completely do away with an individual or corporate tax like Wyoming. Wyoming does this in large part to attract investment, something more “popular” states such as New York or California do not have a problem with. Many of the states in the top 10 are also some of the least populated in the country, and their welfare spending is marginal. Florida is the lone exception in the top 5. 

While it is tempting to compare states across the country, the nuances of business-tax policy at a state level are highly dependent on the neighboring state’s policies. Montana, Wyoming, and North and South Dakota are vying for similar investments so their focus is regional, as with the rest of the union.