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The Cowboy State has once again won the tax rodeo for having the most competitive tax structure according to the Tax Foundation.
The Tax Authorities recently revised its… State Competitiveness Index 2025. This research revealed which states are taxpayer-friendly for both individuals and businesses. States are ranked based on income, sales, excise, property, capital gains, corporate, payroll, estate, and VAT consumption taxes. The Tax Foundation found that Wyoming is the most taxpayer-friendly state, Montana is 5th, Idaho is 11th and Washington is 45th.
The report acknowledges that replicating Wyoming’s exact tax structure may not be possible due to its significant tax revenue from natural resources, but that other taxpayer-friendly states such as Montana and Idaho can be replicated.
Wyoming was the highest state for the fifth year in a row mainly due to the lack of corporate or individual income taxes. Furthermore, it has no inventory, franchise, occupancy or value-added tax. It also enjoys tax exemptions for manufacturers and data centers. Wyoming has the luxury of no corporate or personal income tax due to significant mineral tax revenue. While Wyoming’s exact tax model cannot be copied, its principles can be applied anywhere.
Idaho improved from its previous ranking of 16th to 11th. This can be attributed to the decrease in individual and corporate tax rates from 5.8% to 5.695%. Idaho has no statewide property taxes (only local taxes), no estate taxes, and a 33 cent gas tax. Idaho currently collects $4,541 in state and local tax collections per capita. Idaho can improve its position by lowering individual income taxes even further.
The chief research analyst for the Comments from the Idaho Tax Commission“Idaho’s tax structure is characterized by moderate to low overall taxes. It is a proportional tax system with a broad structure and a good balance between tax types.”
Washington scored poorly because of its many high tax burdens. It is an outlier because it has no typical income tax, but does have a 7% capital gains tax. Similarly, although the country has no corporate tax, it does have a state tax on gross receipts ranging from 1.3% to 3.3%. It also levies sales taxes, property taxes, inheritance taxes and a high gas tax. Washington collects $6,644 in state and local collections per capita. Washington must reduce its expenses and rein in what is considered taxable. Unfortunately, a recent state court ruling allowing a capital gains tax opens the door to taxing other assets and sources of income.
Montana has an individual income tax ranging from 4.7% to 5.9%. Montana has a relatively low tax burden with a property tax rate of 0.69%, no estate taxes and a gas tax of 33.75 cents. Montana collects $5,065 in state and local tax collections per capita. Montana is moving in the right direction by passing multiple tax cuts during the 2023 legislative session. Included was lowering the income tax cap from 6.75% to 5.9%, increasing small business exemptions from $100,000 in 2021 to now nearly $1 million in 2024, and lowering the capital gains tax to making Montana the fourth lowest in the country. Governor Gianforte recently announced that he plans to reduce the state income tax even further to 4.9%.
In response to the release of the Tax Foundation’s research, Montana Governor Greg Gianforte noted: “In Montana, we will continue to advance our pro-employment, family and business policies to make our state make it the best place to live. work and start a business. By lowering taxes and cutting red tape, the American dream can come to life for even more Montanans.”
The Tax Foundation’s research shows that lowering tax rates should be at the forefront of policy decisions for each legislative session across the country. Washington State must address the shortcomings of its tax code. The Evergreen State should look at ways to reduce spending, rather than stretching the meaning of words to raise even more taxes, as in the capital gains effort. Wyoming, Montana and Idaho are on the right track and should remain steadfast in their commitment to limited government, efficient spending and low taxes.
Sam Cardwell is a policy analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.