A study finds that Indiana does not have the best tax environment for small businesses, but it’s better than most states.
SimplifyLLC, which produces guides for helping people start and operate small businesses, evaluated data on all 50 states and the District of Columbia. The Hoosier State ranked 19th nationally.
The study looked at five key taxes – corporate, personal income, sales, property and unemployment – to rank the states.
None of the top five states in SimplifyLLC’s rankings – Nevada, South Dakota, Washington, Wyoming and Texas – have corporate or personal income taxes.
“Our analysis found that states with no or low personal and corporate income taxes are the most tax-friendly for small businesses, even when they have higher taxes for property, sales and unemployment compared with other states,” the report stated.
Indiana has a low, flat income tax rate of 3.15%, and the General Assembly approved a budget this year that will continue cutting that rate until it reaches 2.9% in 2027.
The state’s corporate tax rate is 4.9%, nearly half of what it was in 2012. According to the Tax Foundation, Indiana had the eighth lowest corporate income tax in the country among states with such a tax. Six states do not tax corporate income.
At 7%, Indiana is tied for the second-highest state sales tax with Tennessee, Rhode Island and Mississippi. However, when local option sales taxes are factored into the equation, Indiana, which does not allow local sales taxes, falls to 24th nationally.
Indiana also ranks near the middle of the pack in terms of property taxes.
Of Indiana’s neighbors, only Ohio finished with a higher ranking. It was ranked eighth in the study. Kentucky finished 26th, Michigan 29th, and Illinois was among the bottom 10 in 42nd place.
While Nevada took home top honors in the rankings, New Jersey finished last, with SimplifyLLC noting the Garden State’s combination of high rates for property, sales, corporate and income taxes sinking it to the bottom.