| Tax Foundation’s Top 10 States: 1. Wyoming 2. South Dakota 3. Nevada 4. Alaska 5. Florida 6. Washington 7. Montana 8. New Hampshire 9. Utah 10. Indiana |
The Tax Foundation’s 2014 picks for the states with the 10 best tax systems are in and Connecticut didn’t make the cut. It moved up from 43 to 42, behind Maryland, but ahead of North Carolina (44), Vermont (45), Rhode Island (46), New Jersey (49), and New York (50). (New Hampshire finished 9th; Massachusetts, 25th; and Maine, 29th).
What does it take to make the top-ten? According to the Foundation, “The absence of a major tax is a dominant factor in vaulting many of these ten states to the top rankings.” States with “complex, non-neutral taxes with comparatively high rates” are more likely to fall in the rankings.
Do taxes matter that much? The Foundation recognizes that “taxes are but one factor in business decision-making.” The quality of roads and bridges and access to highly skilled workers also matter, but “a simple, sensible tax system can positively impact business operations with regard to these very resources.”
| Tax | Weight (%) | CT Rank |
| Individual Income Tax | 32.4 | 33 |
| Sales Tax | 21.5 | 32 |
| Corporate Tax | 20.2 | 35 |
| Property Tax | 14.4 | 49 |
| Unemployment Insurance Tax | 11.5 | 23 |
Are some taxes more burdensome than others? Yes, according to the Foundation, and that’s why it weighs the taxes differently. It also compares the states on each tax and ranks them accordingly (see sidebar). (A recent OLR Report examining 13 state ranking studies, including the Foundation’s 2013 business climate index, found similar differences between overall and sub-rankings.)
Empirical studies measuring and weighing tax or business climates are open to relentless peer review, and the Tax Foundation’s is no exemption. Governing Magazine’s Mike Maciag compared the Foundation’s 2014 rankings to other empirical studies measuring state economic performance and found “no correlation between states rated higher and those with better employment indicators. In fact, some of the lowest-ranked states weathered the recession quite well.”
