The 10 best states in this year's 2013 Index are Wyoming, South Dakota, Nevada, Alaska, Florida, Washington, New Hampshire, Montana, Texas, and Utah. Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.
The 10 lowest ranked, or worst, states in the 2012 Index are Maryland, Iowa, Wisconsin, North Carolina, Minnesota, Rhode Island, Vermont, California, New Jersey, and New York. New York slid past New Jersey for the bottom spot by having the worst individual income tax, the sixth-worst unemployment insurance taxes, and the sixth-worst property taxes. (The overall scores for the two states remain close, New Jersey at 3.403 and New York at 3.395.) The states in the bottom ten generally have complex, non-neutral taxes with comparatively high rates.
Michigan moved most dramatically in its Index rank over the past year, rising from 18th best to 12th best. Michigan eliminated its problematic Michigan Business Tax (MBT), which taxed corporate profits at a 4.95 percent rate, corporate gross receipts at a 0.8 percent rate, and surtaxed both those things at a 21.99 percent rate. Michigan abolished that tax along with the associated generous tax incentives, replacing the entire system with a flat 6 percent corporate income tax. On the corporate component, Michigan improved from 49th to 7th, pushing its overall rank up six places.
Maine also rose significantly, from 37th best to 30th best. This improvement occured in part due to the expiration of a ban on business tax loss carry forwards and the suspension of the individual income alternative minimum tax (AMT).
We hope that this information helps you gauge how your tax system compares and provides a roadmap for improving the business tax climate. Each year, the Index report is downloaded over half a million times and is referenced in hundreds of major media articles and in several State of the State addresses. The rankings are used in other organization's rankings as the tax component, and recent academic evidence found correlation between Index component ranking and state wage and economic growth.
The 2013 Index reflects state tax systems as they stood on July 1, 2012, the start of the 2013 Fiscal Year in most states. Read the 56-page Index report by Scott Drenkard and Joseph Henchman and the results at http://taxfoundation.org/article/2013-state-business-tax-climate-index. (Download a PDF version here.)