Preface to the New Edition
The study before you, which has been published as the State Business Tax Climate Index since 2003, was rebranded as the State Tax Competitiveness Index for the 2025 edition. This rebranding better reflects the index's focus on states' overall tax competitiveness, not just the business tax climate. This wasn’t merely a surface change; we have reworked the index from the ground up to enhance its quality.
For over two decades, the Index has assisted policymakers in evaluating their tax codes, serving as a roadmap for reform. Each year, the study underwent methodological refinements to adapt to changing tax code elements, such as the introduction of global intangible low-taxed income (now net CFC tested income) or the design of remote seller taxes following the Wayfair decision. However, recent years have seen an accelerated pace of change:
- The Tax Cuts and Jobs Act adoption.
- Wayfair decision implications.
- The rise of remote work and global pandemic-related tax shifts, including unemployment insurance tax regimes.
- The One Big Beautiful Bill Act adoption.
- The introduction of digital advertising taxes.
- Emerging interest in taxes on wealth, unrealized gains, data, digital products, and more.
We recognized the need to address these developments more comprehensively and provide more detailed analysis of tax provisions already included in the Index. While the old Index performed well, independent evaluations demonstrated a strong correlation between Index ranks and state economic outcomes, we wanted to refresh the publication to keep up with the evolving tax landscape.
The 2025 refresh involved more than just updating the methodology and renaming. We also redesigned the presentation of the Index's vast tax policy information. The Index's 150+ variables are no longer confined to appendix tables; the online publication, formerly an interactive map with a lengthy PDF, has been reimagined for a digital environment.
Now, each state receives a summary highlighting key tax code features and explaining its rank on the Index. Users can access interactive, sortable, and filterable datasets, along with new visuals and historical rate tools. We encourage you to explore:
- View your state's policy choices for every Index variable.
- Compare multiple states side by side.
- Focus on specific variables and see how all states perform.
This is the third year under the new methodology. If comparing our current rankings with older editions (2024 or earlier), you might notice more significant shifts. Some of this is due to states implementing substantial tax code changes recently. Additionally, our methodological changes contribute to these differences.
To ensure a consistent comparison, and in the interest of transparency, we have backcast states' rankings under the new methodology for the past seven years. These backcast rankings, showing actual state movement in recent years, should be cited for accuracy. As with previous editions, we have always backcast to account for methodological revisions, but the scope of change in this edition is more extensive due to the addition of more variables and adjustments.