Study on state tax competitiveness - NY/NJ/CA are losers

A recent study by the Tax Foundation, 2025 State Tax Competitiveness Index | Full Study has highlighted significant disparities in tax competitiveness across the United States, with New York, New Jersey, and California ranking as the least competitive states, while Wyoming emerged as the most favorable for businesses.

Here are the top and bottom 10.

  1. Wyoming 41. Massachusetts

  2. South Dakota 42. Hawaii

  3. Alaska 43. Vermont

  4. Florida 44. Minnesota

  5. Montana 45. Washington

  6. New Hampshire 46. Maryland

  7. Texas 47. Connecticut

  8. Tennessee 48. California

  9. North Dakota 49. New Jersey

  10. Indiana 50. New York

The Bottom Three: New York, New Jersey, and California

New York and New Jersey have long struggled with high tax burdens, and this year is no exception. New Jersey, in particular, has been ranked the worst in business taxation due to its complex and high-rate tax structure. The state imposes some of the highest property taxes in the country, along with steep corporate and individual income taxes. New York follows closely behind, burdened by high property and income taxes that deter business investment and growth.

California rounds out the bottom three, plagued by a combination of high corporate taxes, stringent regulations, and a high cost of living. These factors collectively create a challenging environment for businesses, driving many to relocate to more tax-friendly states.

Wyoming: The Best in Tax Competitiveness

On the other end of the spectrum, Wyoming has been recognized as the most tax-competitive state. Wyoming’s tax system is highly favorable for businesses, primarily because it imposes neither a corporate income tax nor an individual income tax. This tax-friendly environment has consistently attracted businesses and fostered economic growth, securing Wyoming’s top spot in the Tax Foundation’s rankings for several years.

And Florida: In fourth place

Florida is the largest populated state ranked in the top 5, recognized as the 4th most competitive state. This high ranking is largely due to Florida’s favorable tax policies, including the absence of an individual income tax.

In recent years, there has been a notable migration of businesses from high-tax states like California and New York to Florida. This trend is driven by Florida’s favorable business environment, which includes no state income tax, lower corporate taxes, and a generally more business-friendly regulatory climate. Additionally, Florida offers a lower cost of living, a growing economy, and a desirable quality of life, making it an attractive destination for businesses seeking to reduce operational costs and improve profitability. These factors collectively make Florida a prime location for companies looking to relocate and thrive.

Implications for Businesses

The Tax Foundation’s study underscores the significant impact that state tax policies can have on business decisions. States with high tax burdens often see businesses relocating to more favorable environments, which can lead to job losses and reduced economic activity. Conversely, states with competitive tax systems, like Wyoming and Florida, are better positioned to attract new businesses and stimulate economic growth.

Conclusion

The stark contrast between the tax competitiveness of states like New York, New Jersey, and California versus Wyoming and Florida highlights the importance of tax policy in shaping economic landscapes. For businesses, understanding these differences is crucial for strategic planning and long-term success. As states continue to compete for business investment, those with more favorable tax environments are likely to see greater economic benefits.

2025 State Tax Competitiveness Index | Full Study

Let us know if you have any questions or require any assistance navigating your state compliance. You can call us at 305-762-9587 or email us at chad.hagger@hagger-tax.com

Or schedule a free consultation for your business accounting and tax here: Free consultation

________________________________________

All rights reserved.

Previous
Previous

Deducting interest expenses on debt with foreign debtor

Next
Next

Go with the CPA