Companies are fleeing Democratic-run coastal states imposing high taxes and relocating to states offering better tax climates, the Wall Street Journal reported Sunday.
The Tax Foundation recently released the “2024 State Business Tax Climate Index,” comparing and ranking states’ tax systems. The report aims to “show how well states structure their tax systems” while providing a “road map for improvement.” The ranking system is not based solely on corporate tax rates and places a higher negative weight on income and sales tax rates. States with complex tax codes are also graded negatively.
This year’s report found that Wyoming took the top spot for best business tax climate, followed by South Dakota, Alaska, Florida, and Montana. New Hampshire, Nevada, Utah, North Carolina, and Indiana rounded out the top ten spots.
“The absence of a major tax is a common factor among many of the top 10 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,” the report stated.
Indiana and Utah were the only states to make the top 10 that impose all major taxes. Nevada, South Dakota, and Wyoming do not levy corporate or individual income taxes, the report noted.
“Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax,” the report added.
Alternatively, New Jersey, New York, California, Connecticut, and Massachusetts were ranked as having the worst business tax climates in the nation. New Jersey was ranked last for the seventh year in a row. Maryland, Minnesota, Vermont, Hawaii, and Rhode Island also landed at the bottom of the list for having the worst business tax climates in the country.
“The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates,” the report explained. “New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income taxes in the country, and has one of the highest-rate individual income taxes.”
In 2022, nearly 150 publicly traded companies relocated from Democratic-run states with high taxes to states with better business tax climates, including Florida, Texas, Arizona, and Utah, the WSJ reported. States that experienced the most significant exodus included New York, California, and Washington. While Washington did not rank at the bottom for worst business tax climates, it imposes a 7% tax rate on capital gains, which is currently being challenged in court.
Over the past several years, a number of Wall Street banks and technology firms fled New York and California, Bloomberg reported. The outlet’s analysis found that the two states had lost nearly $1 trillion each in assets due to the departures, which included companies like Elliott Management, AllianceBernstein, and Charles Schwab.
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