![]() ![]() Mississippi continued phasing out its 3 percent corporate income tax bracket by exempting the first $3,000 of income this year.Indiana’s rate decreased to 5.5 percent on July 1, 2019, and a further reduction to 5.25 percent is scheduled to kick in July 1, 2020.A further reduction to 5.5 percent is scheduled for 2020, pending legislative approval. As part of a 2018 tax cut package following federal reform, Georgia lowered its top corporate income tax rate from 6 percent to 5.75 percent and doubled the standard deduction.Florida’s corporate income tax rates were set to revert to the 2018 rate of 5.5 percent, but legislation was enacted to extend the 2019 rate of 4.458 percent to 20.Several states implemented corporate income tax rate changes over the past year, among other revisions and reforms. Notable Corporate Income Tax Changes in 2020 Ī single-rate system minimizes the incentive for firms to engage in economically wasteful tax planning to mitigate the damage of higher marginal tax rates that some states levy as taxable income rises. Indeed, low-income corporations may be owned by individuals with high incomes, and high-income corporations may be owned by individuals with low incomes. Graduated corporate rates are inequitable-that is, the size of a corporation bears no necessary relation to the income levels of the owners. Jeffrey Kwall, professor of law at Loyola University Chicago School of Law, notes that: The greater propensity toward single-rate systems for corporate tax than individual income tax is likely because there is no meaningful “ability to pay” concept in corporate taxation. Thirty states and the District of Columbia have single-rate corporate tax systems. South Dakota and Wyoming levy neither corporate income nor gross receipts taxes. Delaware and Oregon impose gross receipts taxes in addition to corporate income taxes, as do several states, like Pennsylvania, Virginia, and West Virginia, which permit gross receipts taxes at the local (but not state) level. Nevada, Ohio, Texas, and Washington forgo corporate income taxes but instead impose gross receipts taxes on businesses, which are generally thought to be more economically harmful due to tax pyramiding and nontransparency. Seven other states impose top rates at or below 5 percent: Florida (4.458 percent), Colorado (4.63 percent), Arizona (4.9 percent), Utah (4.95 percent), and Kentucky, Mississippi, and South Carolina (5 percent). Two other states (Alaska and Illinois) levy rates of 9 percent or higher.Ĭonversely, North Carolina’s flat rate of 2.5 percent is the lowest in the country, followed by rates in Missouri (4 percent) and North Dakota (4.31 percent). Iowa levies the highest top statutory corporate tax rate at 12 percent, followed by New Jersey (10.5 percent), Pennsylvania (9.99 percent), and Minnesota (9.8 percent). Though often thought of as a major tax type, corporate income taxes account for an average of just 4.73 percent of state tax collections and 2.27 percent of state general revenue. South Dakota and Wyoming are the only states that do not levy a corporate income or gross receipts tax.Ĭorporate income taxes are levied in 44 states.Gross receipts taxes are generally thought to be more economically harmful than corporate income taxes. Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes.Ten states-Arizona, Colorado, Florida, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, South Carolina, and Utah-have top rates at or below 5 percent.Six states-Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania-levy top marginal corporate income tax rates of 9 percent or higher.Rates range from 2.5 percent in North Carolina to 12 percent in Iowa. Forty-four states levy a corporate income tax. ![]()
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