A Comparative Analysis of State Tax Costs on Business
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State and local taxes represent a significant business cost for corporations operating in the United States and can have a material impact on net operating margins. Consequently, business location decisions for new manufacturing facilities, corporate headquarter relocations, and the like are often influenced by assessments of relative tax burdens across multiple states.
The Tax Foundation, in collaboration with KPMG, set out to develop and publish a landmark, apples-to-apples comparison of corporate tax costs in the 50 states. Tax Foundation economists designed seven model firms, and KPMG modeling experts calculated each firm’s tax bill in each state. Each firm was modeled twice in each state: once as a new firm eligible for tax incentives, and once as a mature firm not eligible for such incentives.
The Location Matters study, together with our annual State Business Tax Climate Index, provides the tools necessary to understand each state’s business tax system, the burdens it imposes, and a roadmap for improving it.
Graph of Effective Tax Rates
- Income Tax
- Property Tax
- Sales Tax
- Unemployment Insurance Tax
- Combined Effective Tax Rate*
*Gray bars indicate that tax type breakdowns are unavailable due to negative effective tax rates for one or more tax types.
M = Mature Firm, N = New Firm
Summary of Effective Tax Rates
|Model Firm Type||Ranking||Mature Firm Rate||New Firm Rate|
|State||Ranking||Mature Firm Rate||New Firm Rate|