GE announced earlier this month that it was moving its headquarters to Massachusetts from Connecticut, following a fight over Connecticut's corporate tax structure. "With the move to Massachusetts, GE is moving to a much more favorable tax climate," Nicole Kaeding, an economist from the Tax Foundation, wrote in a Jan. 13 report. In its State Business Tax Climate Index, the Tax Foundation ranks Connecticut 44th and Massachusetts 25th.
The full ranking is displayed below. Wyoming is number one, or most favorable, according to the Tax Foundation. New Jersey earned a 50 based on corporate, income, property, sales and unemployment insurance taxes. The 2016 index includes tax changes in effect as of July 1, 2015, the start of most states' 2016 fiscal year. The bluer a state, the more favorable its tax climate is, according to the Tax Foundation.
The individual income tax component makes up about 33.2 percent of the total index score, the heaviest weighting of the five categories. Connecticut is one of three states that applies the highest income tax rate to all income reported by taxpayers in the top bracket, the Tax Foundation said. Other states only apply the highest rate to income above the highest bracket threshold. That policy helped push Connecticut down to number 36. Here's how the states compare on the individual tax component.
The corporate income tax component makes up 18.5 percent of a state's total score in Tax Foundation's rankings. Connecticut has the fifth highest corporate tax rate at 9 percent, following Iowa's 12 percent, Pennsylvania's 9.99 percent, Minnesota's 9.8 percent and Alaska's 9.4 percent. The tax rate is just one factor that goes into the corporate tax ranking. Also considered are tax credits, treatment of net operating losses, double taxation and other factors. Connecticut moved down one notch in the corporate income tax ranking year over year to 33rd. Here are how the states compare at the corporate tax level, according to the report.
In the Tax Foundation's State Business Climate Index, which includes corporate, income, property, sales and unemployment insurance taxes, Illinois made the biggest leap year over year toward favorable tax conditions. The Land of Lincoln jumped up eight spots to 23rd in 2016 from 31st the previous year due to the sunset of corporate and individual income tax increases first imposed in 2011, the Tax Foundation said. That pushed Illinois's corporate income tax to 7.75 percent from 9.5 percent and individual income taxes to 3.75 percent from 5 percent.