A Tax Holiday No One Wants
If you took a cross-country road trip designed to maximize your sales tax burden, what would your itinerary look like?
California is a good place to start. There, you’d shell out 79.6 cents per gallon in federal and state excise taxes on gasoline (highest in the nation) before perhaps heading north to Washington to purchase some holiday spirits (taxed at a hefty $36.98 per gallon, also a U.S. high). Next, you might head east to Minnesota for vape supplies (taxed at $2.49/mL), before heading south to Louisiana for – well, just about everything else. The Bayou State levies the highest combined state and average local sales and use tax rate in the country at 10.11%.
When it comes to sales tax burdens, Washington, Alabama, Tennessee, and California share runner-up status to Louisiana by “ imposing high [sales tax] rates and taxing a range of business inputs, such as utilities, services, manufacturing, and leases—and maintaining relatively high excise taxes,” according to the Tax Foundation’s 2026 State Tax Competitiveness Index.
The report is a doozy – its 118 pages are packed with extensive evaluations of how well states structure their tax systems to promote economic competitiveness. Many of these assessments feature candid, amply supported criticisms, like this point: “In the absence of base-broadening reforms, states have instead resorted to rate increases to maintain the sales tax’s share within the tax base…”
The Competitiveness Index evaluates the structure (and rates) of each state’s corporate taxes, individual income taxes, sales and excise taxes, property taxes, and unemployment insurance taxes.
Top 10 vs. Bottom 10
While the Tax Foundation has produced this index for two-plus decades, the assessment methodology was refreshed last year to reflect substantial changes in state taxation, including digital advertising taxes, post-Wayfair remote-seller requirements, and changing excise tax structures. The index includes state-by-state summaries that highlight notable tax code features, context for each state’s competitiveness ranking, and rundowns of specific reforms that would improve individual state’s tax competitiveness.
The states atop the 2026 rankings for competitiveness include:
- Wyoming
- South Dakota
- New Hampshire
- Alaska
- Florida
- Montana
- Texas
- Tennessee
- Idaho
- Indiana
The least tax-competitive states include:
- Hawaii
- Vermont
- Massachusetts
- Minnesota
- Washington
- Maryland
- Connecticut
- California
- New Jersey
- New York
The “most competitive” states tend to omit a major tax. South Dakota and Wyoming each lack both corporate and individual income taxes, for example. However, Idaho and Indiana levy all major taxes and still rank in the top 10. On the other side of the coin, the least competitive states typically earn multiple penalties for high rates along with complex tax structures across corporate, individual, and property taxes.
This type of analysis explains why policymakers use the Index to evaluate their tax codes. It’s also an eye-opening resource for travel planning. If you want a tax-friendlier, albeit inefficient, road trip, you could try buying gas in Alaska, Hawaii, or New Mexico; spirits (and beer) in Wyoming; and cigarettes in Missouri; and everything else in Montana. The Big Sky state has no state sales tax and use tax.
