Colorado ranks 27th among the 50 states in the latest comparison of how tax systems affect businesses.
Colorado fared well in the 2024 State Business Tax Climate Index for comparatively lower corporate and individual income taxes, but less so for sales taxes and unemployment insurance. The state ranked 21st in the 2023 index.
The Tax Foundation — a nonprofit, nonpartisan tax research organization based in Washington, D.C. — compiles the index to compare states for the competitiveness of their tax codes.
The index takes into account variables in five major areas of taxation: corporate and individual income taxes, property and sales taxes and unemployment insurance. The index compares not only how much states collect in taxes, but also how well they structure their tax systems.
“Taxes influence investment, location decisions, job creation and overall economic growth,” said Jared Walczak, vice president of state projects for the Tax Foundation. “States with better tax structures outcompete their peers for investment and economic growth. In an increasingly mobile economy, states cannot afford to be indifferent to tax competition.”
For the 2024 index, Colorado ranked seventh for the lowest corporate tax rate and 13th for the lowest individual income tax rate. The state fared less well at 38th for property taxes, 40th for sales taxes and 44th for unemployment insurance.
Wyoming remained atop the 2024 State Business Climate Index for a 11th straight year. Wyoming imposes no corporate or individual income taxes and ranked seventh for sales tax.
South Dakota remained second and also imposes no corporate or individual income taxes. Alaska ranked third, followed by Florida at fourth and Montana at fifth. Alaska imposes no individual income tax or state sales tax. Florida imposes no individual income tax. Montana imposes no state or local sales taxes.
New Hampshire, Nevada, Utah, North Carolina and Indiana rounded out the top 10. Utah, North Carolina and Indiana levy all major tax types, but their rankings also reflect well-structured taxes across the board.
New Jersey remained last in the 2023 index at 50th. The state imposes some of the highest corporate and individual income taxes as well as property and sales taxes.
New York ranked 49th with the highest individual income tax and comparatively high property and sales taxes. California ranked 48th, followed by Connecticut at 47th and Massachusetts at 46th.
Maryland, Minnesota, Vermont, Hawaii and Rhode Island rounded out the top 10.