The Tax Foundation recently released its 2025 State Competitiveness Index. This study 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.

Wyoming was the top-ranking state for the fifth year in a row mostly because of its lack of corporate or individual income tax. Additionally, it has no inventory, franchise, occupation, or value-added taxes. It also enjoys tax exemptions for manufacturers and data centers. Wyoming has the luxury of having no corporate or personal income tax due to significant tax revenue from minerals. Although Wyoming’s exact tax model can’t be copied, its principles can be applied everywhere.

Idaho improved from its prior ranking of 16th to 11th. This can be attributed to its individual and corporate tax rates declining from 5.8% to 5.695%. Idaho has no statewide property tax (local tax only), no estate tax, and a 33-cent gas tax. Idaho currently collects $4,541 in state and local tax collections per capita. Idaho can improve its ranking by lowering individual income taxes even more.

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 tax, and a 33.75 cent gas tax. Montana collects $5,065 in state and local tax collections per capita. Montana has been trending in the right direction by passing multiple tax cuts in the 2023 legislative sessions. Included was lowering the income tax ceiling from 6.75% to 5.9%, increasing the small business exemptions from $100,000 in 2021 to now almost $1 million in 2024, and lowering the capital gains tax to make Montana the 4th lowest in the country. Gov. Gianforte recently announced that he plans to reduce the state income tax even more to 4.9%.