Taxes

Ranking Corporate Income Taxes on the 2022 State Business Tax Climate Index

In the coming weeks, we will break down our 2022 State Business Tax Climate Index, released in December, with maps illustrating each of the five major components of the Index: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. Today we look at states’ rankings on the corporate tax component, which accounts for 20.9 percent of each state’s overall rank.

The corporate tax component of our State Business Tax Climate Index measures each state’s principal tax on business activities. Most states levy a corporate income tax on a company’s profits (receipts minus most business expenses, including compensation and the cost of goods sold), while some states levy gross receipts taxes, which allow few or no deductions for a company’s expenses.

Unlike other studies that look solely at tax burdens, the Index measures how well or poorly each state structures its tax system. It is concerned with the how, not the how much, of state revenue, because there are better and worse ways to levy taxes. Our corporate tax component, for example, scores states not just on their corporate tax rates and brackets, but also on how they handle net operating losses, whether they levy gross receipts-style taxes (which are more economically harmful than corporate income taxes), whether businesses can fully expense purchases of machinery and equipment, and whether states index their brackets for inflation, among other factors.

Click here to see an interactive version of states’ corporate tax rankings, and then click on your state for more information about how its tax system compares both regionally and nationally.

Corporate Tax Component of the State Business Tax Climate Index (2019-2022)
State 2019 Rank 2020 Rank 2021 Rank 2022 Rank Change from 2021 to 2022
Alabama 22 23 23 17 6
Alaska 25 26 26 28 -2
Arizona 16 21 22 23 -1
Arkansas 40 34 34 30 4
California 38 28 28 46 -18
Colorado 6 7 9 6 3
Connecticut 34 27 27 27 0
Delaware 50 50 50 50 0
Florida 11 9 6 7 -1
Georgia 8 6 7 8 -1
Hawaii 12 17 19 19 0
Idaho 28 29 29 29 0
Illinois 37 36 36 42 -6
Indiana 19 11 12 11 1
Iowa 47 48 46 38 8
Kansas 32 35 31 21 10
Kentucky 15 13 15 15 0
Louisiana 35 37 35 34 1
Maine 33 38 37 35 2
Maryland 26 32 33 33 0
Massachusetts 39 39 38 36 2
Michigan 13 18 20 20 0
Minnesota 44 46 45 45 0
Mississippi 14 10 13 13 0
Missouri 4 3 3 3 0
Montana 9 20 21 22 -1
Nebraska 29 31 32 32 0
Nevada 21 25 25 25 0
New Hampshire 46 43 41 41 0
New Jersey 49 49 48 48 0
New Mexico 23 22 11 12 -1
New York 18 14 16 24 -8
North Carolina 3 4 4 4 0
North Dakota 17 19 8 9 -1
Ohio 43 42 42 40 2
Oklahoma 20 8 10 10 0
Oregon 30 33 49 49 0
Pennsylvania 45 44 43 44 -1
Rhode Island 36 40 39 37 2
South Carolina 5 5 5 5 0
South Dakota 1 1 1 1 0
Tennessee 27 24 24 26 -2
Texas 48 47 47 47 0
Utah 7 12 14 14 0
Vermont 41 45 44 43 1
Virginia 10 15 17 16 1
Washington 42 41 40 39 1
West Virginia 24 16 18 18 0
Wisconsin 31 30 30 31 -1
Wyoming 1 1 1 1 0
District of Columbia 24 24 24 25 -1

Note: A rank of 1 is best, 50 is worst. All scores are for fiscal years. DC’s score and rank do not affect other states.

Source: Tax Foundation.

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