Which U.S. States Offer the Best Tax Policy Climate in 2025?

The Tax Foundation released its 2025 State Tax Competitiveness Index, and the award for most competitive state goes to … Wyoming.

No huge surprise there. The Cowboy State has no corporate or individual income tax, nor does it impose an estate tax. Although Wyoming has a sales tax (unlike, for example, Alaska and Montana), it applies low general rates across a broad base, according to the Tax Foundation report.  

Every state levies property taxes and unemployment insurance taxes, but some states get by without at least one of the major taxes -- corporate income tax, individual income tax or sales tax. States that do so tend to perform well on the index, including all of the other top five states, which are (in declining order of competitiveness): South Dakota, Alaska, Florida and Montana.

States with far less favorable tax climates tend to impose complex taxes with relatively high rates. The five lowest-ranked states are (also in order of declining competitiveness): Maryland, Connecticut, California, New Jersey and New York.

To cover these trends more comprehensively, the Index includes some updates this year that will help for teams working on indirect tax compliance. The datasets are now interactive, sortable and filterable. You can easily drill down by State, for any variable: for example, you can quickly compare the sales tax rate in Texas (6.25%) and Georgia (4%).

The report also notes that “states have been incredibly busy recently, adopting significant changes to their tax codes.” The state tax policy environment is evolving rapidly, driven by factors such as remote working models, the ongoing impact of the Supreme Court’s Wayfair decision, the nation’s first digital advertising tax and increasing interest in taxing digital products.

Stay ahead of emerging tax trends with our newly released 2024 End-of-Year Rates and Rules Report, which highlights this year’s surge in district-level taxes. The report details notable growth in district tax activity, including new taxes and rate changes, as local governments respond to economic pressures and fiscal challenges for 2024 and 2025. With indirect tax complexity rising, remaining informed is more important than ever—stay tuned for further updates.