New Jersey has been ranked 49th out of 50 states in the Tax Foundation’s 2026 State Tax Competitiveness Index, released Thursday. The annual report, previously known as the State Business Tax Climate Index, evaluates each state’s tax system based on several categories including income taxes, corporate taxes, property taxes, and unemployment insurance taxes.
Since 2014, New Jersey has consistently held either the 49th or 50th position in these rankings. The report was rebranded last year to better reflect overall tax competitiveness rather than focusing solely on business tax climate.
For the second consecutive year, New Jersey ranked just above New York at No. 49. Wyoming topped the list for most competitive tax system in 2026, followed by South Dakota and New Hampshire.
The authors of the index noted: “The states in the bottom 10 tend to have a number of issues in common: complex, nonneutral taxes with comparatively high rates,” adding that “New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the highest-rate corporate income tax in the country, and has one of the highest-rate individual income taxes.”
They continued: “Additionally, the state has a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.”
The index assesses all states across five main components: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes. Each category’s influence on a state’s total score depends on how much variation exists among states within that area; this method gives more weight to areas where states can compete more effectively.
The foundation explained that while other factors such as workforce quality or proximity to markets also affect business decisions—and sometimes require trade-offs—the structure of a state’s tax system remains crucial for growth opportunities. “Taxes … are an important part of the mix,” they said.
New Jersey imposes some of the country’s highest personal income tax rates with a top marginal rate at 10.75% and includes a marriage penalty. Despite introducing its income tax in 1976 partly to reduce reliance on property taxation, New Jersey still ranks near the top nationally for per capita property tax collections and holds one of the highest effective property tax rates.
Corporations operating in New Jersey face a top marginal rate of 11.5%, which includes an extra charge called the Corporate Transit Fee for large businesses. However, recent changes have removed global intangible low-taxed income (GILTI) from its taxable base and tangible personal property is exempt from local taxation.
In terms of net operating losses for corporations, New Jersey allows up to twenty years’ carryforward without any cap on dollar amounts. Although it repealed its estate tax several years ago, it continues to levy an inheritance tax.
A recent change affected unemployment insurance taxation as well. As of July 1st this year—following recovery efforts after pandemic-related claims depleted its trust fund—New Jersey reduced its unemployment insurance rates from between 0.6%–6.4% down to between 0.5%–5.8%. This adjustment improved its ranking within this subindex from last place (No. 50) last year up to No. 46 this year.
