Ranking Property Taxes on the 2020 State Business Tax Climate Index

Today’s map shows states’ rankings on the property tax component of the 2020 State Business Tax Climate Index. The Index’s property tax component evaluates state and local taxes on real and personal property, net worth, and asset transfers. The property tax component accounts for 16.6 percent of each state’s overall Index score.

Property taxes matter to businesses for several reasons. First, businesses own a significant amount of real property, and tax rates on commercial property are often higher than the rates on comparable residential property. Many states and localities also levy taxes not only on the land and buildings a business owns but also on tangible property, such as machinery, equipment, and office furniture, as well as intangible property like patents and trademarks. Across the nation, property taxes impose one of the most substantial state and local tax burdens most businesses face. In fiscal year 2018, taxes on real, personal, and utility property accounted for 38 percent of all taxes paid by businesses to state and local governments, according to the Council on State Taxation.

Although taxes on real property tend to be unpopular with the public, a well-structured property tax generally conforms to the benefit principle (the idea in public finance that taxes paid should relate to benefits received) and is more transparent than most other taxes.

Taxes on intangible property, wealth, and asset transfers, on the other hand, are harmful and distortive. States that levy such taxes—including capital stock taxes, inventory and intangible property taxes, and estate, inheritance, gift, and real estate transfer taxes—are less economically attractive, as they create disincentives for investment and encourage businesses to make choices based on the tax code that they would not make otherwise. Businesses with valuable trademarks may seek to avoid headquartering in states with intangible property taxes, and shipping and distribution networks might be shaped by the presence or absence of inventory taxes.

States are in a better position to attract business investment when they maintain competitive real property tax rates and avoid harmful taxes on tangible personal property, intangible property, wealth, and asset transfers. This year, the states with the best scores on the property tax component are New Mexico, Indiana, North Dakota, Idaho, Utah, and Delaware. States with the worst scores in this component are Connecticut, Vermont, Massachusetts, New Jersey, New York, and Rhode Island, plus the District of Columbia.

Best and worst property tax codes in the country. See full state property tax code rankings in 2019.

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To gauge whether your state’s property tax structure has become more or less competitive in recent years, see the table below.

Property Tax Component of the State Business Tax Climate Index (2017–2020)
Note: A rank of 1 is best, 50 is worst. All scores are for fiscal years. DC’s score and rank do not affect other states.

Source: Tax Foundation.

State 2017 Rank 2018 Rank 2019 Rank 2020 Rank Change from 2019 to 2020
Alabama 18 12 16 15 1
Alaska 24 38 25 25 0
Arizona 6 6 6 8 -2
Arkansas 25 22 29 29 0
California 17 13 15 16 -1
Colorado 16 14 14 14 0
Connecticut 50 49 50 50 0
Delaware 11 20 7 6 1
Florida 13 10 13 13 0
Georgia 23 23 27 28 -1
Hawaii 9 16 11 11 0
Idaho 3 3 5 4 1
Illinois 41 45 40 40 0
Indiana 4 4 3 2 1
Iowa 35 39 35 35 0
Kansas 21 19 20 20 0
Kentucky 37 36 36 36 0
Louisiana 32 30 33 33 0
Maine 43 41 42 43 -1
Maryland 44 42 43 42 1
Massachusetts 47 46 48 48 0
Michigan 26 21 24 24 0
Minnesota 29 28 26 26 0
Mississippi 36 35 37 37 0
Missouri 7 7 8 7 1
Montana 12 9 12 12 0
Nebraska 40 40 41 41 0
Nevada 10 8 10 10 0
New Hampshire 42 44 44 44 0
New Jersey 49 50 47 47 0
New Mexico 1 1 1 1 0
New York 45 47 46 46 0
North Carolina 33 32 34 34 0
North Dakota 2 2 2 3 -1
Ohio 8 11 9 9 0
Oklahoma 14 15 19 19 0
Oregon 19 18 17 18 -1
Pennsylvania 22 33 22 21 1
Rhode Island 46 43 45 45 0
South Carolina 27 24 30 30 0
South Dakota 20 25 21 22 -1
Tennessee 31 29 31 31 0
Texas 38 37 38 38 0
Utah 5 5 4 5 -1
Vermont 48 48 49 49 0
Virginia 30 31 32 32 0
Washington 28 27 28 27 1
West Virginia 15 17 18 17 1
Wisconsin 34 26 23 23 0
Wyoming 39 34 39 39 0
District of Columbia 48 46 49 49 0

To learn more about how we determined these rankings, read our full methodology here.

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