Ranking Property Taxes on the 2022 State Business Tax Climate Index

May 10, 2022 1:00 pm Published by Comments Off on Ranking Property Taxes on the 2022 State Business Tax Climate Index

Today’s map shows states’ rankings on the property tax component of our 2022 State Business Tax Climate Index. The Index’s property tax component evaluates state and local taxes on real and personal property, net worth, and asset transfers. The property tax component accounts for 14.4 percent of each state’s overall Index score.

Property taxes matter to businesses for several reasons. First, businesses own a significant amount of real property, and tax rates on commercial property are often higher than the rates on comparable residential property. Many states and localities also levy taxes not only on the land and buildings a business owns but also on tangible property, such as machinery, equipment, and office furniture, as well as intangible property like patents and trademarks. Across the nation, property taxes impose one of the most substantial state and local tax burdens most businesses face. In fiscal year 2020, taxes on real, personal, and utility property accounted for almost 38 percent of all taxes paid by businesses to state and local governments, according to the Council on State Taxation.

Although taxes on real property tend to be unpopular with the public, a well-structured real property tax generally conforms to the benefit principle (the idea in public finance that taxes paid should relate to benefits received) and is more transparent than most other taxes.

Taxes on intangible property, wealth, and asset transfers, on the other hand, are harmful and distortive. States that levy such taxes—including capital stock taxes, inventory and intangible property taxes, and estate, inheritance, gift, and real estate transfer taxes—are less economically attractive, as they create disincentives for investment and encourage businesses to make choices based on the tax code that they would not make otherwise. Businesses with valuable trademarks may seek to avoid headquartering in states with intangible property taxes, and shipping and distribution networks might be shaped by the presence or absence of inventory taxes.

States are in a better position to attract business investment when they maintain competitive real property tax rates and avoid harmful taxes on tangible personal property, intangible property, wealth, and asset transfers. This year, the states with the best scores on the property tax component are Indiana, New Mexico, Idaho, Delaware, Nevada, and Ohio. States with the worst scores on this component are Connecticut, Vermont, Illinois, New York, New Hampshire, Massachusetts, New Jersey, plus the District of Columbia.

Ranking property taxes by state property tax ranking on intangible property wealth and asset on 2022 State Business Tax Climate Index

To gauge whether your state’s property tax structure has become more or less competitive in recent years, see the following table. (Methodological changes are backcast to prior years to facilitate comparability.)

Property Tax Component of the State Business Tax Climate Index (2019–2022)
State2019 Rank2020 Rank2021 Rank2022 RankChange from 2021 to 2022
Alabama191819190
Alaska22232324-1
Arizona11111011-1
Arkansas26252627-1
California131514140
Colorado33333334-1
Connecticut505050500
Delaware44440
Florida121212120
Georgia293025250
Hawaii21262930-1
Idaho33330
Illinois484848480
Indiana22211
Iowa38383839-1
Kansas313131310
Kentucky232122220
Louisiana272724231
Maine40404041-1
Maryland414143430
Massachusetts454445450
Michigan25242021-1
Minnesota323232320
Mississippi37373738-1
Missouri99880
Montana30282829-1
Nebraska393941401
Nevada56550
New Hampshire464547461
New Jersey444644440
New Mexico1112-1
New York47474647-1
North Carolina141313130
North Dakota6711101
Ohio75660
Oklahoma282930282
Oregon16191617-1
Pennsylvania171615150
Rhode Island424242420
South Carolina36353536-1
South Dakota151421183
Tennessee353434331
Texas34363637-1
Utah88770
Vermont494949490
Virginia242227261
Washington18171820-2
West Virginia1010990
Wisconsin202017161
Wyoming434339354
District of Columbia494950500

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.

To learn more about how we determined these rankings, read our full methodology.


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