Wyoming, South Dakota and Alaska took the top three spots in the latest ranking of tax system competitiveness among U.S. states. Florida and Texas also made the top five. At the opposite end of the list were New York, California and New Jersey.
Wyoming is this year’s leader in the State Tax Competitiveness Index 2027, scoring 7.70 points on the scale used by the report’s authors. South Dakota placed second with 7.56 points, and Alaska was third with 6.89 points. Florida ranked fourth with 6.71 points. Texas rounded out the top five, moving up two places from the previous edition.
The highest-ranked states stand out for, among other things, having no broad-based state income tax on individuals. That does not mean their residents pay no taxes at all. The states raise revenue from other sources, such as sales, property, business and resource extraction taxes.
One of the biggest climbs in the new edition belongs to Nebraska, which jumped from 24th to 16th place this year. The rise was linked, among other things, to a gradual reduction in income tax rates and changes to the rules for how businesses are taxed. Louisiana also made significant progress, moving up nine places to 23rd. Its improved score was driven by tax system reforms, including the elimination of the capital tax for businesses.
New York ranked last, in 50th place with a score of 3.66 points. California fared only slightly better, placing 49th with 3.90 points, followed by New Jersey in 48th with 3.92 points. Washington State came in 47th, and Connecticut 46th.
The State Tax Competitiveness Index 2027, prepared by the Tax Foundation, compares the tax rules in the 50 U.S. states, assessing their structure and their impact on the business climate. The authors stress that the ranking does not simply measure the amount of taxes paid by the average resident. Its aim is to assess whether a tax system is transparent, neutral and conducive to investment and economic activity. In practice, this means a state with relatively high tax revenue can receive a better score than a state that collects less in taxes but applies more complicated rules or measures the authors consider unfavorable to businesses.
The analysis took into account more than 150 variables covering five main areas: individual income taxes, corporate taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. The component scores are then combined into an overall assessment of the system’s competitiveness.
Details of the ranking can be found at: https://taxfoundation.org/state-tax-index/
Edited by JŁ
