REPORT: Best to Worst State Tax Systems for Entrepreneurship and Small Business

By at 16 April, 2015, 6:43 am

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Contact: Raymond J. Keating, 631-909-1122

Washington, D.C. – Tax Day has come and gone, but tax compliance and paying taxes weigh on small business owners and entrepreneurs everyday. At the state level, some states make it easy to deal with taxes. Other states make it real painful. Today, the Small Business & Entrepreneurship Council (SBE Council) published “Small Business Tax Index 2015: Best to Worst State Tax Systems for Entrepreneurship and Small Business,” which ranks the 50 states according to the costs of their tax systems for entrepreneurship and small business.

(Visit the Small Business Policy Index 2015 interactive map.)

Raymond J. Keating, chief economist for SBE Council and author of the report, said: “Capital and labor are more mobile than ever before in history. And entrepreneurs, workers, and investment will migrate to where they are treated best. Key among the factors considered are taxes, and that is the case country to country, and within the U.S., state by state.”

Keating noted, “Some states are situated well from a competitive tax standpoint, with others moving in the right direction. Consider that compared to last year’s report, nine states reduced individual and/or corporate income taxes. Those were Arizona, Arkansas, Illinois, Indiana, Kansas, Massachusetts, New Mexico, North Carolina, and Rhode Island.”

SBE Council’s Small Business Tax Index 2015 pulls together 23 different tax measures, and combines those into one tax score that allows the 50 states to be compared and ranked. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Best Tax Systems: According to the Small Business Tax Index 2015, the 15 best state tax systems are: 1) South Dakota, 2) Nevada, 3) Texas, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Colorado, 9) Ohio, 10) Alaska, 11) Arizona, 12) Indiana, 13) Michigan, 14) Utah, and 15) North Dakota.

Worst Tax Systems: The 15 that fared the worst include: 36) Maryland, 37) Delaware, 38) Rhode Island, 39) Idaho, 40) Nebraska, 41) Connecticut, 42) Oregon, 43) Vermont, 44) Maine, 45) New York, 46) Iowa, 47) Hawaii, 48) Minnesota, 49) New Jersey, and 50) California.

In the report, Keating wrote: “When it comes to state and local taxes – as well as levies at the federal level – the direction that policy should be pointed in is clear. Keep the overall tax burden low. Preferably, do no tax income at all. In the end, if the tax burden is light on economic risk taking, then that will be good news for entrepreneurship, businesses, investment, economic growth and job creation in each state.”

Get complete state rankings and read SBE Council’s Small Business Tax Index 2015or visit the interactive map.

SBE Council is a nonprofit advocacy, research and education organization that works to protect small business and promote entrepreneurship.  For more than twenty years, SBE Council has worked to strengthen the ecosystem for startups and small business success. For more information visit Follow on Twitter @SBECouncil.

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