Best and Worst States for Business Taxes

I f you're starting a small business, it's smart to consider the business taxes in the state where your company is operating. But how can you determine the best business taxes by state for entrepreneurs? Which ones have the worst? And which is the best state for an LLC in the first place?

As Raymond J. Keating , chief economist for SBE Council and author of the report, explains: “In the end, if the state’s tax burden is light on economic risk taking, then that will be good news for entrepreneurship, businesses, investment, economic and income growth, and job creation in each state.”

The 2017 Small Business & Entrepreneurship Council ’s latest Small Business Tax Index, released in June 2017, ranks the costs of these tax systems and business taxes by state. This index compiles 26 different tax measures and combines them into a single tax score. It includes various types of taxes that may be relevant, such as capital gains, income, unemployment, death, gas, diesel, wireless and property.

In this list, we've included a few of the 26 different tax measures that would be of most interest to entrepreneurs. The states that ranked highest for business taxes had no or very low corporate income taxes, individual personal gains taxes, dividends and interest tax rates, and corporate gains taxes. Because the taxes were far lower, businesses could enjoy a lighter tax burden and invest their profits toward growing their company. Conversely, those with high taxes were ranked the lowest. That's because higher taxes would eat into their bottom line.

Based on the index, here are the best and worst business taxes by state:

Best States for Business Taxes

1. Nevada

Top Individual Personal Gains Tax Rate: 0.000 Top Dividends and Interest Tax Rate: 0.000 Top Corporate Income Tax Rate: 0.000 Top Corporate Gains Tax Rate: 0.000 Added S Corp Rate: 0.000 Property Taxes: 2.376

2. Texas

Top Personal Income Rate: 0.000 Top Individual Personal Gains Tax Rate: 0.000 Top Dividends and Interest Tax Rate: 0.000 Top Corporate Income Tax Rate: 0.000 Top Corporate Gains Tax Rate: 0.000 Added S Corp Rate: 0.000 Property Taxes: 3.602

3. South Dakota

4. Wyoming

5. Washington

Worst States for Business Taxes

1. California

Top Personal Income Rate: 13.300 Top Individual Personal Gains Tax Rate: 13.300 Top Dividends and Interest Tax Rate: 13.300 Top Corporate Income Tax Rate: 8.840 Top Corporate Gains Tax Rate: 8.840 Added S Corp Rate: 1.500 Property Taxes: 2.763

2. New Jersey

Top Personal Income Rate: 8.970 Top Individual Personal Gains Tax Rate: 8.970 Top Dividends and Interest Tax Rate: 8.970 Top Corporate Income Tax Rate: 9.000 Top Corporate Gains Tax Rate: 9.000 Added S Corp Rate: 0.000 Property Taxes: 5.395

3. Maine

Top Personal Income Rate: 10.150 Top Individual Personal Gains Tax Rate: 10.150 Top Dividends and Interest Tax Rate: 10.150 Top Corporate Income Tax Rate: 8.930 Top Corporate Gains Tax Rate: 8.930 Added S Corp Rate: 0.000 Property Taxes: 4.560

4. Minnesota

Top Personal Income Rate: 9.850 Top Individual Personal Gains Tax Rate: 9.850 Top Dividends and Interest Tax Rate: 9.850 Top Corporate Income Tax Rate: 9.800 Top Corporate Gains Tax Rate: 9.800 Added S Corp Rate: 0.000 Property Taxes: 2.896

5. Iowa

Top Personal Income Rate: 5.424 Top Individual Personal Gains Tax Rate: 7.184 Top Dividends and Interest Tax Rate: 7.184 Top Corporate Income Tax Rate: 9.900 Top Corporate Gains Tax Rate: 9.900 Added S Corp Rate: 0.000 Property Taxes: 3.384

Are you ready to start a business , form an LLC or reorganize your business structure for a more sustainable future? Talk to Bizee today . Our incorporation experts can help you evaluate your options with state-specific advice.