2026 State Tax Competitiveness Index: Interactive Tool

2026 State Tax Competitiveness Index: Interactive Tool
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2026 State Tax
Competitiveness Index
The Tax Foundation’s
State Tax Competitiveness Index
enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the
Index
evaluates how well states structure their tax systems and provides a road map for improvement.
Here's how to think about it
Overall Rankings
Corporate Taxes
Individual Income Taxes
Sales Taxes
Property Taxes
Unemployment Insurance Taxes
Overall Rankings
The
State Tax Competitiveness Index
compares each state on more than 150 variables in the five major areas of taxation (corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes and then adds the results to yield a final, overall ranking. This approach rewards states on particularly strong aspects of their tax systems (or penalizes them on particularly weak aspects), while measuring the general competitiveness of their overall tax systems. The result is a score that can be compared to other states’ scores.
Top States Overall
#1
Wyoming
#2
South Dakota
#3
New Hampshire
#4
Alaska
#5
Florida
Bottom States Overall
#50
New York
#49
New Jersey
#48
California
#48
District of Columbia
#47
Connecticut
Corporate Taxes
This component measures the impact of each state’s principal tax on business activities and accounts for 21.1 percent of each state’s total score. It includes corporate income taxes and gross receipts taxes. It is well established that the extent of business taxation can affect a business’s level of economic activity within a state.
Top States, Corporate Taxes
#1
South Dakota
#1
Wyoming
#3
North Carolina
#4
Oklahoma
#5
Missouri
Bottom States, Corporate Taxes
#50
Delaware
#49
Oregon
#48
Tennessee
#47
Washington
#46
Texas
Individual Income Taxes
The individual income tax component, which accounts for 31.8 percent of each state’s total
Index
score, is important to both individuals and businesses because a significant number of businesses, including sole proprietorships, partnerships, and S corporations, report their income through the individual income tax code.
Top States, Individual Taxes
#1
Wyoming
#1
South Dakota
#1
Florida
#1
New Hampshire
#1
Alaska
#1
Texas
#1
Tennessee
Bottom States, Individual Taxes
#50
New York
#49
California
#48
New Jersey
#47
Maryland
#46
Connecticut
#46
District of Columbia
Sales Taxes
Sales tax makes up 21.2 percent of each state’s
Index
score. The type of sales tax familiar to taxpayers is a tax levied on the purchase price of a good at the point of sale. Due to the inclusion of some business inputs in most states’ sales tax bases, the rate and structure of the sales tax is an important consideration for many businesses. The sales tax can also hurt the business tax climate and tax competitiveness because as the sales tax rate climbs, customers make fewer purchases or seek low-tax alternatives. As a result, business is lost to lower-tax locations, causing lost profits, lost jobs, and lost tax revenue. The effect of differential sales tax rates among states or localities is apparent when a traveler crosses from a high-tax state to a neighboring low-tax state. Typically, a vast expanse of shopping malls springs up along the border in the low-tax jurisdiction.
Top States, Sales Taxes
#1
New Hampshire
#2
Delaware
#3
Montana
#4
Oregon
#5
Alaska
Bottom States, Sales Taxes
#50
Louisiana
#49
Washington
#48
Alabama
#47
Tennessee
#46
California
Property Taxes
The property tax component, which includes taxes on real and personal property, net worth, and the transfer of assets, accounts for 14.5 percent of each state’s
Index
score. When properly structured, real property taxes exceed most other taxes in comporting with the benefit principle and can be fairly economically efficient. In the realm of public finance, they are often also prized for their comparative transparency among taxes, though that transparency may contribute to the public’s generally low view of property taxes.
Top States, Property Taxes
#1
New Mexico
#2
Delaware
#3
Idaho
#4
Indiana
#5
Ohio
Bottom States, Property Taxes
#50
Vermont
#49
Connecticut
#48
Massachusetts
#47
New York
#47
District of Columbia
#46
Nebraska
Unemployment Insurance Taxes
Unemployment insurance (UI) is a social insurance program jointly operated by the federal and state governments. Taxes are paid by employers into the UI program to finance benefits for workers recently unemployed. Compared to the other major taxes assessed in the
State Tax Competitiveness Index
, UI taxes are much less well-known. Every state has one, and all 50 of them are complex, variable-rate systems that impose different rates on different industries and different bases depending upon such factors as the health of the state’s UI trust fund.
Top States, UI Taxes
#1
Arizona
#2
Delaware
#3
Nebraska
#4
Kansas
#5
Missouri
Bottom States, UI Taxes
#50
Alaska
#49
Washington
#48
Rhode Island
#47
Nevada
#46
New Jersey
2026
State Tax Competitiveness Index
Ranks and Component Tax Ranks
State
Overall Rank
Corporate Tax Rank
Individual Income Tax Rank
Sales Tax Rank
Property Tax Rank
Unemployment Insurance Tax Rank
Alabama
37
16
35
48
18
19
Alaska
35
31
50
Arizona
14
13
45
10
Arkansas
34
15
40
43
16
10
California
48
41
49
46
27
26
Colorado
33
20
21
39
34
40
Connecticut
47
30
46
19
49
39
Delaware
24
50
43
Florida
17
16
20
Georgia
18
16
18
35
22
Hawaii
41
27
45
29
15
43
Idaho
21
14
36
Illinois
38
42
13
37
41
42
Indiana
10
20
14
15
Iowa
17
25
11
11
33
35
Kansas
23
26
28
21
26
Kentucky
25
19
25
20
30
30
Louisiana
31
10
15
50
22
Maine
26
40
23
45
21
Maryland
46
36
47
40
36
18
Massachusetts
43
33
42
22
48
45
Michigan
16
22
19
10
29
28
Minnesota
44
43
44
35
23
44
Mississippi
27
32
23
39
13
Missouri
12
17
25
12
Montana
24
12
17
25
Nebraska
22
14
26
12
46
Nevada
20
39
41
47
New Hampshire
37
44
23
New Jersey
49
44
48
34
42
46
New Mexico
28
23
37
38
17
New York
50
28
50
42
47
38
North Carolina
13
22
15
21
North Dakota
11
11
18
17
14
Ohio
39
45
33
44
11
Oklahoma
19
29
32
11
Oregon
35
49
41
28
41
Pennsylvania
36
34
38
24
13
34
Rhode Island
40
32
30
27
43
48
South Carolina
29
24
28
40
27
South Dakota
31
20
Tennessee
48
47
32
16
Texas
46
36
38
31
Utah
15
12
10
26
14
29
Vermont
42
38
39
30
50
12
Virginia
30
18
36
13
24
37
Washington
45
47
31
49
25
49
West Virginia
32
29
27
33
19
24
Wisconsin
21
31
34
32
Wyoming
37
33
District of Columbia
48
32
46
43
47
24
Note: A rank of 1 is best, 50 is worst. Rankings do not average to the total. States without a tax rank equally as 1. DC's score and rank do not affect other states. The report shows tax systems as of July 1, 2025 (the beginning of fiscal year 2026).
Source: Tax Foundation.
Notable Changes
Delaware fell four places overall (to 24
th
) as other states implemented substantial reforms while Delaware largely stood still. Delaware is hampered by being one of only two states to impose both income taxes and a state-level gross receipts tax, and by having a comparatively low unemployment trust fund solvency ratio, among other factors.
Learn more about Delaware
Georgia’s corporate income tax and individual income tax rates continued to phase down in 2025, with both declining from 5.39 to 5.19 percent. These rates will continue to decrease in the coming years if the state meets certain revenue goals. The rate reductions drove a 3-spot improvement in the state’s corporate income rank, a 1-place improvement in its individual income tax rank, and an improvement from 23
rd
to 22
nd
overall. Although it did not improve the property tax rank, Georgia also increased its tangible personal property tax de minimis exemption from a low $7,500 to a more generous $20,000.
Learn more about Georgia
Idaho, which has implemented a range of reforms in recent years, reduced its now-flat individual and corporate income tax rates from 5.695 to 5.3 percent in 2025, boosting it two additional places on the
Index
, moving from 11
th
to 9
th
overall.
Learn more about Idaho
Indiana’s state individual income tax rate decreased from 3.05 to 3 percent in 2025, but rising local income tax rates, paired with rate reductions in other states—including Louisiana, which also adopted a 3 percent single-rate income tax in 2025—saw Indiana’s overall rank fall slightly, from 9
th
to 10
th
. Future planned rate reductions to 2.9 percent should help the Hoosier State, if not offset by further income tax increases at the local level.
Learn more about Indiana
Illinois added global intangible low-taxed income (GILTI) to its tax base, which has since transitioned to a tax on net CFC-tested income (NCTI) at the federal level due to changes under the One Big Beautiful Bill Act (OBBBA). This change reduced Illinois’ score on our
Index
, but not enough to change its rank.
Learn more about Illinois
Iowa improved two places on the
Index
, from 19
th
to 17
th
overall, as the state implemented a flat 3.8 percent individual income tax in 2025. This represents the continuation of several years of ongoing reforms that have seen a dramatic improvement in Iowa’s rankings. The state’s corporate tax component rank slid as other states made improvements, but the planned consolidation of the state’s corporate income tax brackets into a 5.5 percent single-rate tax will further improve Iowa’s rankings in the coming years.
Learn more about Iowa
Louisiana improved six ranks on the 2026
Index
, with further improvement expected in next year’s edition, due to reforms adopted in a late 2024 special session focused on tax competitiveness. Lawmakers enacted sweeping reform, which included a new flat individual income tax rate of 3 percent, a corporate income tax rate of 5.5 percent, and permanent full expensing. These reforms improved Louisiana from 31st to 15
th
on the individual income tax component of the
Index
and from 29
th
to 10
th
on the corporate tax component. In 2026, the state’s franchise (capital stock) tax will be repealed, and Louisiana will conform to ordinary treatment of S corporations rather than requiring them to file as C corporations, both of which will yield meaningful further improvement in the state’s
Index
rank.
Learn more about Louisiana
Maine improved from 31
st
to 26
th
, primarily due to a decline in property tax collections as a percentage of personal income at a time when most states saw significant increases in property tax collections due to soaring assessed values insufficiently offset by mill levy (rate) reductions.
Learn more about Maine
Maryland adopted the nation’s most aggressive package of tax increases in 2025. Lawmakers added two additional tax brackets on high earners, yielding a top marginal individual income tax rate of 6.5 percent, while also increasing the cap on county income tax rates to 3.3 percent. The state also established a 2 percent surtax on high earners’ capital gains, and imposed a new alternate-rate 3 percent sales tax on data, IT, and other business-to-business digital services. These changes dropped Maryland from 45
th
to 46
th
overall, sliding one place on the individual income tax component (from 46
th
to 47
th
) and five places on the sales tax component (from 35
th
to 40
th
).
Learn more about Maryland
Michigan’s overall rank slid two places, partially due to new targeted corporate incentives but mostly from rate competition in other states, with several—particularly Georgia, Idaho, Louisiana, Nebraska, and Utah—lowering individual and corporate income tax rates while Michigan did not.
Learn more about Michigan
Montana slid one place on the 2026
Index
, from 5
th
to 6
th
. The state implemented a tiered property tax structure with different rates applying depending on the value of the property, effectively shifting the tax burden rather than providing meaningful relief. Simultaneously, New Hampshire leapfrogged Montana and several other high-ranking states on the
Index
with the repeal of its tax on interest and dividend income.
Learn more about Montana
Nebraska improved one place on the
Index
, from 22
nd
to 21
st
, in part due to a reduction in the state’s top marginal individual income tax rate to 5.2 percent. In 2026, the individual income tax rate will decrease from 4.99 percent, and the corporate rate will be trimmed to 4.55 percent, with further reductions scheduled for 2027.
Learn more about Nebraska
New Hampshire joined the ranks of states without an individual income tax with the elimination of its interest and dividends (I&D) tax on January 1, 2025. As a result, New Hampshire improved three places overall and 12 places on the individual income tax component.
Learn more about New Hampshire
New Mexico cut against broader national trends in enacting a corporate income tax increase by eliminating the benefit of a 4.8 percent lower rate and taxing all corporate income at 5.9 percent, but the state’s two-place slide in the
Index
was not driven by this policy change, but rather by improvements in the tax structures of competitor states.
Learn more about New Mexico
Ohio improved two places, from 35
th
to 33
rd
, on the individual income tax component as the state’s top individual income tax rate declined from 3.5 percent to 3.125 percent. However, while this is among the lower top rates among income-taxing states, Ohio municipalities and school districts also possess individual income tax authority, yielding much higher combined rates than would be indicated by state rates alone. Next year, Ohio’s two remaining individual income tax rates will be consolidated as the state adopts a flat-rate 2.75 percent income tax.
Learn more about Ohio
For the second year in a row, Oregon’s rank dropped due to competitive reforms in other states as Oregon stood still. At the time of publication, Oregon lawmakers were considering changes in conformity to the federal Internal Revenue Code that could further harm the state’s tax competitiveness in future years.
Learn more about Oregon
In recent years, Pennsylvania has adopted meaningful reforms to its corporate income tax system, including aligning its previously stingy net operating loss (NOL) carryforwards with federal standards and phasing in reductions to the corporate income tax rate, which once stood at 9.99 percent. In 2025, the corporate rate fell from 8.49 to 7.99 percent, with future 0.5 percentage point reductions scheduled until the rate reaches 4.99 percent. Pennsylvania improved two places on the corporate tax component with this year’s rate reduction.
Learn more about Pennsylvania
Rhode Island’s net operating loss (NOL) carryforward period was increased from 5 to 20 years, effective January 1, 2025, improving its corporate tax component ranking by three places. Additionally, the state recently increased its fuel and cigarette excise tax rates, hurting its sales and excise tax ranking. However, Rhode Island’s overall ranking did not change.
Learn more about Rhode Island
As part of a larger budget bill, South Carolina temporarily reduced its top individual income tax rate from 6.2 percent to 6 percent, effective July 1, 2025, and lasting until July 1, 2026. However, this change did not drive an improvement in the state’s individual income or overall scores due to movement from other states.
Learn more about South Carolina
Utah lawmakers continue to implement incremental reductions in the state’s individual and corporate income tax rates. The reductions in 2025, from 4.55 to 4.5 percent for both taxes, were enough to improve Utah’s overall
Index
rank from 16
th
to 15
th
Learn more about Utah
In Washington, lawmakers implemented a new 9.9 percent rate on the capital gains tax, causing the state to slide two places on the individual income tax component of the
Index
. The state’s top estate tax rate—already tied for the nation’s highest—was also increased from 20 to 35 percent. Nevertheless, a host of tax increases in Maryland resulted in Washington swapping places with it and improving by one rank. Washington’s adoption of new sales taxes on business purchases of digital products, including digital advertising, went into effect on October 1, after the July 1, 2025, snapshot date of this
Index
, but will affect Washington’s rank in future editions.
Learn more about Washington
State Tax Competitiveness Index
(2020-2026)
State
2020
2021
2022
2023
2024
2025 Rank
2025 Score
2026 Rank
2026 Score
2025-2026 Rank
2025-2026 Score
Alabama
39
39
40
40
38
36
4.79
37
4.80
-1
0.01
Alaska
6.96
6.93
-1
-0.03
Arizona
18
18
19
15
15
15
5.45
14
5.52
0.07
Arkansas
41
42
39
39
37
35
4.90
34
4.93
0.03
California
48
48
48
48
48
48
3.87
48
3.81
-0.05
Colorado
22
23
21
28
33
32
5.00
33
4.97
-1
-0.03
Connecticut
47
47
47
47
47
47
4.14
47
4.17
0.03
Delaware
17
17
17
18
18
20
5.32
24
5.22
-4
-0.11
Florida
6.82
6.84
-1
0.02
Georgia
28
27
29
29
32
23
5.24
18
5.38
0.14
Hawaii
37
38
41
42
41
41
4.55
41
4.56
0.01
Idaho
14
13
14
10
11
5.63
5.69
0.06
Illinois
32
32
33
33
36
38
4.77
38
4.78
0.01
Indiana
10
11
11
11
5.71
10
5.66
-1
-0.05
Iowa
43
41
37
36
22
19
5.35
17
5.40
0.06
Kansas
27
28
24
22
23
25
5.20
23
5.22
0.02
Kentucky
19
19
20
20
21
24
5.21
25
5.20
-1
-0.01
Louisiana
40
40
44
38
39
37
4.79
31
5.06
0.27
Maine
26
26
22
32
29
31
5.05
26
5.14
0.09
Maryland
42
43
46
45
45
45
4.39
46
4.20
-1
-0.20
Massachusetts
36
37
36
37
44
43
4.45
43
4.45
0.00
Michigan
12
11
12
14
14
14
5.52
16
5.44
-2
-0.08
Minnesota
46
46
45
44
42
42
4.49
44
4.44
-2
-0.05
Mississippi
29
29
30
30
31
27
5.08
27
5.12
0.04
Missouri
13
13
13
5.55
12
5.62
0.07
Montana
6.30
6.19
-1
-0.11
Nebraska
25
25
25
25
28
22
5.24
22
5.27
0.03
Nevada
16
16
16
17
17
18
5.36
20
5.34
-2
-0.03
New Hampshire
5.98
7.20
1.23
New Jersey
50
50
49
49
49
49
3.68
49
3.71
0.03
New Mexico
20
21
31
23
24
26
5.09
28
5.09
-2
0.00
New York
49
49
50
50
50
50
3.60
50
3.65
0.05
North Carolina
11
10
10
12
12
12
5.61
13
5.62
-1
0.01
North Dakota
14
13
13
10
10
5.64
11
5.62
-1
-0.02
Ohio
34
34
34
34
35
39
4.75
39
4.78
0.02
Oklahoma
23
22
27
21
19
17
5.37
19
5.37
-2
0.00
Oregon
12
28
31
26
33
5.02
35
4.92
-2
-0.10
Pennsylvania
35
35
35
35
34
34
4.97
36
4.91
-2
-0.06
Rhode Island
44
44
42
41
40
40
4.68
40
4.69
0.01
South Carolina
31
30
32
26
30
29
5.06
29
5.09
0.03
South Dakota
7.64
7.71
0.07
Tennessee
38
36
5.94
6.04
0.10
Texas
5.98
6.11
0.12
Utah
15
15
15
16
16
16
5.42
15
5.48
0.06
Vermont
45
45
43
43
43
44
4.42
42
4.52
0.10
Virginia
24
24
26
27
25
28
5.04
30
5.07
-2
0.03
Washington
33
33
38
46
46
46
4.25
45
4.21
-0.04
West Virginia
30
31
23
24
27
30
5.04
32
5.06
-2
0.02
Wisconsin
21
20
18
19
20
21
5.32
21
5.30
-0.03
Wyoming
7.67
7.74
0.07
District of Columbia
47
47
48
48
48
48
4.05
48
4.14
0.08
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.
Meet the Authors
Expert
Janelle Fritts
Policy Analyst
Janelle Fritts is a Policy Analyst with the Tax Foundation’s Center for State Tax Policy. She is the lead researcher on the annual State Tax Competitiveness Index and is one of the lead authors of Pro-Growth Tax Reform for Oklahoma. Her work has been cited in The New York Times, the Associated Press, Bloomberg, and numerous state media outlets across the country.
Expert
Jared Walczak
Senior Fellow
Jared Walczak is a Senior Fellow at the Tax Foundation, where he spent five years as Vice President of State Projects, and president of Walczak Policy Consulting.
Expert
Abir Mandal
Senior Policy Analyst
Abir Mandal is a Senior Policy Analyst at the Tax Foundation, focused on state tax policy. Dr. Mandal holds a PhD in economics from Clemson University, where he focused on economic growth and development, trade, and econometrics.
Expert
Katherine Loughead
Director of State Tax Projects
Katherine Loughead is the Director of State Tax Projects at the Tax Foundation, where she oversees the state tax policy team’s research agenda and serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.
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