With the passage of the fiscal cliff deal and the expiration of the payroll tax holiday, most Americans will be paying more taxes this year – but the hike could hurt more depending on what state you live in.
PHOTO GALLERY: Click Here to See the 10 Worst States for Taxes
The Tax Foundation's 2013 State Business Tax Climate report recently ranked the best and worst states for taxes to enable business leaders, policymakers and taxpayers understand how their states measure up. The 10 best include low-population, western states including Wyoming and South Dakota, as well as a few eastern states like New Hampshire and Florida. And what did they have in common? They had low rates or lacked one of the five major taxes – individual income, corporate, property, sales, or unemployment insurance.
According to the report, the lesson is simple: A state that raises sufficient revenue without one of the major taxes, all things being equal, has an advantage over those states that levy every tax in the state tax collector’s arsenal. They’ll be more competitive in attracting new business and more effective at generating economic and employment growth, since high taxes are a turn-off for both businesses and individuals.
How the Rankings Were Calculated
The 10 worst all levied complex, non-neutral taxes that favor some economic activities over others and have comparatively high individual and corporate tax rates.
“Multiple layers of data [show] that domestic migration occurs consistently away from high tax states,” says Mat Franken, founder of ResidencyHQ.com, a resource for residency information. “Our data points to high-tax states losing residents to low-tax states.”
Here's a look at the top 10 worst states for taxes, in descending order, as of July 1, 2012 (the start of FY 2013).