The Tax Foundation has released the third edition of a s tudy breaking down business-friendly tax systems, from first to worst.

Foundation economists found the 10 states with the least hospitable business tax climates to be: New York, New Jersey, Rhode Island, Ohio, Vermont, Maine, Kentucky, Nebraska, Iowa and Arkansas.

The states with the most business-friendly tax systems were Wyoming, South Dakota, Alaska, Florida, Nevada, New Hampshire, Texas, Delaware, Montana and Oregon.

The "State Business Tax Climate Index," by economist Curtis S. Dubay and foundation president Scott A. Hodge ranks the 50 states on the content of their tax systems. The groups said that the goal of the rankings is to focus lawmakers on good tax fundamentals in their states, rather than short-term tax abatements and exemptions designed to temporarily lure businesses from other states.

"Every one of the best tax systems raises sufficient revenue without imposing at least one of the three major state taxes -- sales taxes, personal income taxes and corporate income taxes," said Dubay, in a statement.

"States do not enact tax changes in a vacuum," said Hodge, in a statement. "Every tax change will affect a state's competitive position relative to its neighbors, as well as globally."

The worst state tax codes tend to have:

  • Complex, multi-rate corporate and individual income taxes;
  • Above-average sales tax rates that don't exempt business-to-business purchases;
  • Complex, high-rate unemployment tax systems; and,
  • High effective property tax rates, as well as a host of other wealth-based taxes.

The nonprofit Tax Foundation monitors tax policy at the federal, state and local levels. The full report, as well as a description of the index's methodology, is available at

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