As we speak’s map exhibits states’ rankings on the property tax element of our 2022 State Enterprise Tax Local weather Index. The Index’s property tax element evaluates state and native taxes on actual and private property, internet value, and asset transfers. The property tax element accounts for 14.4 % of every state’s total Index rating.
Property taxes matter to companies for a number of causes. First, companies personal a major quantity of actual property, and tax charges on business property are sometimes larger than the charges on comparable residential property. Many states and localities additionally levy taxes not solely on the land and buildings a enterprise owns but in addition on tangible property, akin to equipment, tools, and workplace furnishings, in addition to intangible property like patents and logos. Throughout the nation, property taxes impose one of the crucial substantial state and native tax burdens most companies face. In fiscal yr 2020, taxes on actual, private, and utility property accounted for virtually 38 percent of all taxes paid by companies to state and native governments, in keeping with the Council on State Taxation.
Though taxes on actual property are typically unpopular with the general public, a well-structured actual property tax typically conforms to the profit precept (the concept in public finance that taxes paid ought to relate to advantages acquired) and is extra clear than most different taxes.
Taxes on intangible property, wealth, and asset transfers, alternatively, are dangerous and distortive. States that levy such taxes—together with capital inventory taxes, stock and intangible property taxes, and property, inheritance, reward, and actual property switch taxes—are much less economically engaging, as they create disincentives for funding and encourage companies to make decisions based mostly on the tax code that they might not make in any other case. Companies with beneficial logos could search to keep away from headquartering in states with intangible property taxes, and transport and distribution networks is perhaps formed by the presence or absence of stock taxes.
States are in a greater place to draw enterprise funding after they keep aggressive actual property tax charges and keep away from dangerous taxes on tangible private property, intangible property, wealth, and asset transfers. This yr, the states with the most effective scores on the property tax element are Indiana, New Mexico, Idaho, Delaware, Nevada, and Ohio. States with the worst scores on this element are Connecticut, Vermont, Illinois, New York, New Hampshire, Massachusetts, New Jersey, plus the District of Columbia.
To gauge whether or not your state’s property tax construction has turn into kind of aggressive in recent times, see the next desk. (Methodological adjustments are backcast to prior years to facilitate comparability.)
|State||2019 Rank||2020 Rank||2021 Rank||2022 Rank||Change from 2021 to 2022|
|District of Columbia||49||49||50||50||0|
Observe: A rank of 1 is greatest, 50 is worst. All scores are for fiscal years. DC’s rating and rank don’t have an effect on different states.
Supply: Tax Basis.
To be taught extra about how we decided these rankings, learn our full methodology.