Every year the Tax Foundation in Washington DC releases its “State Business Tax Climate Index” that ranks states in a unique way. It seeks to compare state tax systems by not only looking at how much states collect in tax revenue, but more importantly how they are collecting that revenue and provide a road map for improvement.
The 10 best states in this year’s Index are:
Wyoming
South Dakota
Alaska
Florida
Montana
New Hampshire
Nevada
Oregon
Utah
Indiana
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. Wyoming, Nevada, and South Dakota have no corporate or individual income tax (though Nevada imposes business 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.
There are only two states in the top ten which impose all three major taxes. Indiana and Utah levy all of the major tax types, but do so with lower rates on broader bases.
Breaking down Utah’s various ranks for each tax (income, property, sales and unemployment) the strongest point for Utah is our property tax rank of #5 due to our Truth in Taxation law, which your Taxpayers Association was instrumental in passing in 1985. Our overall rank is pulled down a bit by lower rankings in other areas like #22 in Sales Tax, #10 in Individual Income Tax and #15 in Unemployment Insurance Tax.
Utah’s ranking slid from #8 to #9 this past year due to voters approving a .15% rate increase in the sales tax to fund Medicaid expansion. It will be interesting to see if Utah can regain the #8 spot next year since the current holder of that spot, Oregon has approved a very onerous gross receipts tax that will surely hurt its ranking.