10 Worst States in the U.S. for Taxes

Source: Thinkstock

It’s not how much money you make that matters, it’s how much you actually keep. Businesses and consumers both face the financial burden of taxes throughout the year. However, not all tax systems in the United States are created equal.

While taxes are a fact of life for Americans, they vary among different states. The Tax Foundation recently analyzed all 50 states to gauge how state tax systems compare, using the organization’s State Business Tax Climate Index. The index uses several components, including corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and property taxes.

The absence of a major tax is a common factor among many of the top-ranking states. Wyoming, South Dakota, and Nevada rank as the best three tax climates, and all have no corporate or individual income taxes. Due to tax reforms, North Carolina surged from 44th place last year to 16th place this year, posting the largest improvement in index history.

“The evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth,” explains the Tax Foundation. “It is true that taxes are but one factor in business decision making. Other concerns, such as raw materials or infrastructure or a skilled labor pool, matter, but a simple, sensible tax system can positively impact business operations with regard to these resources.”

Maine posted the steepest year-over-year drop in the rankings — from 28th to 33rd. The move is primarily due to a higher sales tax rate and an improvement in the relative rankings of North Carolina and Nebraska. Let’s take a look at the 10 worst states in the nation based on their tax climates.

Source: iStock

10. Iowa

  • Overall rank: 41
  • Corporate tax rank: 49
  • Individual income tax rank: 32
  • Sales tax rank: 23
  • Unemployment insurance tax rank: 33
  • Property tax rank: 38

Source: Thinkstock

9. Connecticut

  • Overall rank: 42
  • Corporate tax rank: 32
  • Individual income tax rank: 34
  • Sales tax rank: 31
  • Unemployment insurance tax rank: 20
  • Property tax rank: 49

Source: Thinkstock

8. Wisconsin

  • Overall rank: 43
  • Corporate tax rank: 33
  • Individual income tax rank: 43
  • Sales tax rank: 14
  • Unemployment insurance tax rank: 27
  • Property tax rank: 31

Source: Thinkstock

7. Ohio

  • Overall rank: 44
  • Corporate tax rank: 26
  • Individual income tax rank: 47
  • Sales tax rank: 32
  • Unemployment insurance tax rank: 5
  • Property tax rank: 20

Source: Thinkstock

6. Rhode Island

  • Overall rank: 45
  • Corporate tax rank: 43
  • Individual income tax rank: 38
  • Sales tax rank: 26
  • Unemployment insurance tax rank: 49
  • Property tax rank: 47

Source: Thinkstock

5. Vermont

  • Overall rank: 46
  • Corporate tax rank: 42
  • Individual income tax rank: 44
  • Sales tax rank: 16
  • Unemployment insurance tax rank: 17
  • Property tax rank: 48

Source: Thinkstock

4. Minnesota

  • Overall rank: 47
  • Corporate tax rank: 44
  • Individual income tax rank: 46
  • Sales tax rank: 37
  • Unemployment insurance tax rank: 29
  • Property tax rank: 34

Source: Thinkstock

3. California

  • Overall rank: 48
  • Corporate tax rank: 34
  • Individual income tax rank: 50
  • Sales tax rank: 42
  • Unemployment insurance tax rank: 14
  • Property tax rank: 14

Source: Thinkstock

2. New York

  • Overall rank: 49
  • Corporate tax rank: 20
  • Individual income tax rank: 49
  • Sales tax rank: 40
  • Unemployment insurance tax rank: 31
  • Property tax rank: 46

Source: Thinkstock

1. New Jersey

  • Overall rank: 50
  • Corporate tax rank: 41
  • Individual income tax rank: 48
  • Sales tax rank: 48
  • Unemployment insurance tax rank: 32
  • Property tax rank: 50

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