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These Are the Tax-Friendliest States

Wyoming ranked as the city with the most favorable climate for taxes. - Dennis Macdonald—Getty Images
Wyoming ranked as the city with the most favorable climate for taxes. Dennis Macdonald—Getty Images

Wyoming has a lot going for it: beautiful scenery, acres of open space, and a proud cowboy tradition.

It's also got a great tax climate for business.

The Cowboy State topped the 2017 State Business Tax Climate Index released Wednesday by the Tax Foundation, which rates states based on their overall tax friendliness. The list ranks states in five main tax categories: corporate, individual income, sales, unemployment insurance, and property.

Wyoming got top marks in terms of corporate taxes and individual income tax, because it doesn't levy one in either area. While it also scored well in terms of sales tax—with a combined state and local rate of 5.42%—the state didn't perform as well with respect to taxes on unemployment and property, ranking 31st and 38th, respectively, among all 50 states.

South Dakota, which also has no corporate or individual income tax, was next on the list of overall tax favorability, notwithstanding a 5.84% combined sales tax rate and property taxes that average $1,126 per person, or 23rd lowest in the nation.

Rounding out the top five tax-friendly states were Alaska, Florida, and Nevada, none of which imposes individual income tax on its residents; Alaska also has no state-level sales tax.

Some states in the top 10, including Indiana and Utah, imposed all five types of major taxes but still ranked high because of low tax rates across the board. Indiana's individual income tax rate of 3.3%, for example, landed it in 10th place, while its average property tax of $968 per person earned it fourth place in the ranking.

And the tax-unfriendliest state? That honor goes to New Jersey, which, at $2,989 per person, has the highest property tax burden in the country. Residents of the Garden State are also hampered by an inheritance tax and an estate tax, as well as income tax levels that can reach as high as 8.97%.

Rounding out the bottom five: New York, California, Vermont, and Minnesota, which according to the Tax Foundation suffer from "complex" tax systems and relatively high rates.

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