Louisiana posted the biggest gain in terms of tax-friendliness while Michigan saw the steepest drop, according to the latest rankings by the Tax Foundation.
The think tank's 2027 State Tax Competitiveness Index, published just last week, reshuffled rankings based on state-level decisions in the wake of last year’s federal tax law, potentially impacting advisors and their high-earning clients who are weighing where to live, work and retire.
Based on the Tax Foundation's latest rankings for tax comeptitiveness in 2027, Louisiana climbed nine places to 23rd, while Michigan dropped nine places to 25th.
Meanwhile, Missouri and Utah broke into the top 10 tax-friendliest jurisdictions, displacing Idaho and North Dakota. And despite the activity in state tax policy, this year's list had the same bottom 10 as last year’s ranking of more and less tax-friendly states, with New York still last.
The Washington, D.C.-based think tank scores states on more than 150 variables across five areas: corporate, individual income, sales and excise, property and wealth, and unemployment insurance taxes.
The individual income tax component carries the most weight, at 30.2% of a state’s score. The rankings reflect tax law as of July 1, 2026, which is when the fiscal year 2027 begins for most states.
"[T]he pace of change has accelerated in recent years," wrote Katherine Loughead, the Tax Foundation’s vice president of state policy, citing "the adoption of the federal Tax Cuts and Jobs Act, "the adoption of the One Big Beautiful Bill Act," and "an emerging interest in new or expanded taxes on wealth [and] unrealized gains," among other items.
Louisiana’s jump reflects the final phase-in of a 2024 overhaul that eliminated the state’s capital stock tax, a levy on businesses regardless of profit. Meanwhile, Nebraska rose eight places to 16th as it cut the state-level top individual rate to 4.55% from 5.2% while lowering its flat corporate rate to the same level.
West Virginia gained six places to 29th and Utah five places to 10th, both largely by adopting the business expensing provisions of the One Big Beautiful Bill Act, which allowed companies to deduct investment costs immediately rather than recognizing them over time. Utah also trimmed its individual and corporate rates to 4.45%.
Kansas and Oklahoma tied for the fifth-largest gain, each climbing four places, to 19th and 15th. Oklahoma made its tax climate sunnier by cutting its top individual rate to 4.5% from 4.75% and consolidating six brackets into three.
Michigan’s slide stemmed largely from its decision not to adopt the federal expensing changes, which let competitors pass it.
Maine, the second-biggest decliner, matters most to wealthy clients. It slid seven places to 40th, one spot above the bottom 10, after adopting a 2% surcharge on income over $1 million. That lifts its top rate to 9.15%, the eighth-highest in the country, according to the report.
Georgia and South Carolina each fell six spots, to 24th and 34th, after passing on some of the new federal expensing rules. South Carolina cut its top individual rate to 5.21% from 6%, but that was not enough to offset those gaps.
Idaho and Virginia each dropped four places, to 13th and 31st. The report said Virginia’s decline was mostly a case of competitors adopting reforms while it stood still.
Wyoming, South Dakota, Alaska, Florida and Texas – all of which are forgoing an individual income tax – held the top five spots in terms of tax-friendliness this year. Texas rose two places, displacing Montana, which slipped to seventh.
At the other end, New York maintained its bottom-place ranking at 50th, followed by California, New Jersey, Washington and Connecticut. California and New Jersey traded places from last year, while Washington slipped one spot, even as a cut in its top estate tax rate to 20% from 35% improved its property and wealth score.
Some policies focused on high earners are already part of legislation, but are not yet reflected in rankings. Those include Washington’s new 9.9% tax on income above $1 million, which takes effect in 2028, and Rhode Island’s new surtax on income over $1 million, which will lift its top rate to 8.99% by 2029.
The state shifts arrive alongside potentially consequential change in the federal-level picture as Democrats retook the House and Senate in the Nov. 3 midterms. The Tax Foundation expects their agenda to include higher corporate taxes, millionaire surtaxes such as Sen. Chris Van Hollen’s proposed 12% top rate on income over $1 million, and an end to the step-up in basis at death.
"Democrats will have limited maneuvering room in 2027 given Republican control of the White House," Andrew Lautz, the group’s senior director of federal policy, and Garrett Watson, its vice president of federal tax policy, wrote in a separate policy note. "Democrats have aggressive proposals to raise significant sums of tax revenue, but they must confront trade-offs."
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