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Best and Worst States for Property Taxes

by Vicki Robbins, November 2013

 

The Tax Foundation's 2014 State Business Tax Climate Index names New Mexico, Idaho, Utah, North Dakota, and Arizona as the best states in the nation for property taxes. The worst states are Connecticut, New Jersey, Vermont, Massachusetts, and Rhode Island. (See map below.)

 

The 2014 Index takes a broad look at five major categories of taxes: property tax, sales tax, unemployment tax, corporate income tax, and individual income tax.

 

Property Taxes Matter

 

It's no secret that property taxes are a major operating expense. Businesses paid $619 billion in state and local taxes in fiscal year 2010, of which 40% ($250 billion) was for property taxes.

 

As the authors note, "Property taxes matter to businesses because the tax rate on commercial property is often higher than the tax on comparable residential property. Additionally, many localities and states levy taxes on the personal property or equipment owned by a business."

 

In the recent economic downtown, real and person property taxes have been a contentious subject as businesses deal with rising taxes even though property values have fallen. That occurs because local governments generally respond to falling property values by raising tax rates to make up needed revenue.

 

Location, Location, Location

 

Property taxes are the most influential tax in terms of impacting location decisions by businesses.

 

High property taxes have an especially negative impact on small business starts. That's because property taxes are paid regardless of profits, and many small businesses are not profitable in their first few years. Analysts estimate that a 10% increase in business property taxes will decrease the number of new plants opening in a state by between 1% and 2%.

 

Authors of the report say states competing for business would be well served to keep statewide property taxes low, so as to be more attractive to business investment. To read the full report, click here.

 

 

Alabama

10

 

Louisiana

24

 

Ohio

20

Alaska

25

 

Maine

40

 

Oklahoma

11

Arizona

6

 

Maryland

41

 

Oregon

15

Arkansas

19

 

Massachusetts

47

 

Pennsylvania

43

California

14

 

Michigan

28

 

Rhode Island

46

Colorado

22

 

Minnesota

33

 

South Carolina

21

Connecticut

49

 

Mississippi

32

 

South Dakota

18

Delaware

13

 

Missouri

7

 

Tennessee

37

Florida

16

 

Montana

8

 

Texas

35

Georgia

31

 

Nebraska

39

 

Utah

4

Hawaii

12

 

Nevada

9

 

Vermont

48

Idaho

3

 

New Hampshire 

42

 

Virginia

26

Illinois

44

 

New Jersey

50

 

Washington

23

Indiana

5

 

New Mexico

1

 

West Virginia

27

Iowa

38

 

New York

45

 

Wisconsin

36

Kansas

29

 

North Carolina

30

 

Wyoming

34

Kentucky

17

 

North Dakota

2

 

Source: Tax Foundation