Tax Foundation: R.I. ranks 40th for business-friendly tax climate

PROVIDENCE – Rhode Island narrowly missed the dubious distinction of the 10 states with the worst tax environments, ranking 40th in a new report published by the Tax Foundation.

The 2022 State Business Tax Climate Index compares tax policies across 50 states as of July 1 for competitiveness and impact on businesses, scoring each with an overall rank, as well as individual scores based upon corporate, individual income, sales, property and unemployment insurance taxes.

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Rhode Island’s latest score marks a slight drop from a year ago, when it was ranked 38th. Since 2014, the Ocean State has consistently fallen to the bottom third of the pack, with rankings from 37th to 44th, according to the Tax Foundation.

Rhode Island’s sales tax score – which incorporates both state and local taxes – was its bright spot, ranking 24th, despite the fact that the state’s 7 percent tax rate is the second-highest in the country. Meanwhile, Rhode Island came in second to last at 49th for its unemployment insurance taxes, a reflection of both high minimum and maximum rates and wage bases, as well as more complicated formulas, according to The Tax Foundation.

Rhode Island’s corporate tax was ranked 37th while its individual income tax came in 31st. State property taxes ranked 42nd.

In terms of overall tax environments, neighboring Massachusetts fared slightly better, with an overall score of 34, while Connecticut was ranked 47th. Wyoming took the top spot for best tax climate in the nation, while New Jersey ranked last.

The report emphasized the importance of state tax policies to businesses, informing in some cases where they choose to move or locate, job creation and growth, profits and, in turn, the overall state economy.