- Days left

South Dakota named best state for business taxes

Mt. Rushmore - S. Dakota is the best tax stateSouth Dakota has the nation's best tax climate for business in 2011, according to the Tax Foundation. The Mount Rushmore State won the distinction for the second year in a row, beating out also sparsely-populated Alaska for the number-one spot. Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah, and Indiana round out the top 10.

The 2011 version of the State Business Tax Climate Index (SBTCI), released this week by the Tax Foundation, ranks states according to their tax systems and how they affect competition for new business and growth. Rankings are chosen not based merely on business tax burdens, but on a combination of tax factors that influence corporate decisions. Specifically, the rankings are based on five areas: major business taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes.

The specific rankings in those five areas don't always correlate to the final rankings. For example, while the top of the list for corporate tax burden features South Dakota and Wyoming, New Hampshire is at the bottom -- even though New Hampshire was ranked in the top 10 for overall business tax climate.

Alaska tied with Florida and South Dakota with the most impressive individual income tax rank, while New York is ranked as the worst. New Hampshire was ranked as the most sales tax friendly state, while Washington state, which cites retail sales tax as a primary source of taxes, is firmly at the bottom. Oklahoma has the most desirable unemployment tax burden; Rhode Island has the worst. In the final category, New Mexico bests all states in terms of the most attractive property tax burden; Tennessee has the distinction of having the most onerous property tax burden.

Where are the worst states to do business? For the first time in five years, it's not New Jersey. New Jersey turned over the title of worst to New York. New York beat out the Garden State by having the perfect storm of bad tax rates: the third worst individual income tax, ninth worst sales tax and worst property tax. The Empire State is followed by, in descending order, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina.

Not surprisingly, five of those states (California, Connecticut, Maryland, New York and New Jersey) recently enacted a so-called "Millionaire's Tax," which increased income tax rates for high wage earners.

Noticeably missing in the bottom 10 is Vermont. For the first time since the SBTCI was published, Vermont avoided being tossed in with the lowest ranked states, improving its position to 38 by, among other things, lowering its top individual income tax rate from 9.4% to 8.95%.

It will be interesting to compare this list with the Tax Foundation's list for next year. In 2010, there will be key gubernatorial elections in 39 states. Of those, at least 16 will certainly result in change, since term limits bar governors of those states from seeking reelection. The rankings for 2012 may be determined not over the next few months, but over the next few days ... at the ballot box.

Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum