Fifth-best: South Carolina

Top personal income tax rate: No. 38 (tie) at 7%
Top individual capital gains rate: No. 14 at 3.92%
Top corporate income tax rate:No. 9 (tie) at 5%
Top corporate capital gains rate: No. 11 (tie) at 5%
Gas tax: 16.8 cents
Wireless tax: 9.6 cents
Internet access tax: No

South Carolina has no death tax, no individual or corporate alternative minimum tax and low unemployment taxes. On the other hand, its personal income rate is fairly high compared with other states, workers compensation costs are high and the state has a very high crime rate, according to the report.

"South Carolina is one of those states that has some clear advantages in key areas," Keating says. "They also are one of the states that have a differential in place between personal and capital gains taxes" excluding part of capital gains from taxation.

The state joins the list this year. It replaced Washington state, which moved down the list to rank 15th best. Keating says the change in ranking results mainly from the data points added this year by the SBE Council.

South Carolina clearly benefited from lower-than-average government debt levels and a slightly lower-than-average share of federal government funding versus other states.

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