The free enterprise system is the most efficient engine for allocating capital to advance economic growth and prosperity. All government spending and thus taxation originates from wealth created by the productive private economy. However, in a democratic system the people grant government limited and defined power to tax and spend for the sake of the common good, even if that means less efficient capital allocation within the economy. The best tax code is one that does not pick winners and losers in the economy; it is easy to understand and comply with; it is transparent; and it does not frequently change, providing certainty to businesses and consumers.

In line with these principles, Common Sense Institute’s Free Enterprise Index scores each state under the taxes and fees metric based on predictability, transparency, overall tax burden, and low and stables rates.