Corporate Tax

2021 corporate tax charges and brackets

Main results

  • Forty-four states have corporate taxes. Rates range from 2.5 percent in North Carolina to 11.5 percent in New Jersey.
  • Six states – Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania – have top corporate tax rates of 9 percent or more.
  • Ten states – Arizona, Colorado, Florida, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, South Carolina, and Utah – have peak rates of 5 percent or less.
  • Nevada, Ohio, Texas, and Washington all levy gross income taxes instead of corporate taxes. Gross income taxes are generally considered to be more economically damaging than corporate taxes.
  • South Dakota and Wyoming are the only states that do not levy corporate income or gross income tax.

Corporate income taxes are levied in 44 countries. Although often viewed as the main type of tax, corporate taxes averaged just 4.66 percent of state tax revenue and 2.27 percent of state general revenue in fiscal 2018.[1]

New Jersey has the highest statutory corporate tax rate at 11.5 percent, followed by Pennsylvania (9.99 percent) and Iowa and Minnesota (both 9.8 percent). Two other states (Alaska and Illinois) mandate rates greater than 9 percent.

Conversely, North Carolina’s flat rate is the lowest in the country at 2.5 percent, followed by the rates in Missouri (4 percent) and North Dakota (4.31 percent). Seven other states have maximum rates of 5 percent or less: Florida (4.458 percent), Colorado (4.55 percent), Arizona (4.9 percent), Utah (4.95 percent), and Kentucky, Mississippi, and South Carolina (5th Percent).

Nevada, Ohio, Texas, and Washington waive corporate taxes, but levy gross income taxes on businesses that are generally viewed as more economically damaging due to tax pyramids and non-transparency.[2] Delaware and Oregon collect gross income taxes in addition to corporate taxes, as do some states like Pennsylvania, Virginia, and West Virginia that allow gross income taxes at the local (but not state) level. South Dakota and Wyoming do not have corporate or gross income taxes.

30 states and the District of Columbia have a unified corporate tax system. The tendency toward uniform corporate tax systems than individual income tax is likely because there is no meaningful concept of solvency in corporate tax. Jeffrey Kwall, Professor of Law at Loyola University’s Chicago School of Law, notes that:

Graduated corporate rates are unfair – that is, the size of a company is not necessarily related to the income level of the owners. Indeed, low-income businesses can be owned by high-income individuals and high-income businesses can be owned by low-income individuals.[3]

A single tax rate system minimizes the incentive for businesses to engage in wasteful tax planning to mitigate the harm of higher marginal tax rates that some states impose as taxable income increases.

Notable changes in corporate tax in 2021

Several states made changes to the corporate tax rate in the past year. Notable changes for 2021 include:

  • In Arkansas, the tax rate dropped to 6.2 percent on January 1, 2021, when a third phase of tax reforms began, which began in 2019. This tax rate is expected to drop even further to 5.9 percent in 2022.[4]
  • Colorado voters approved Proposition 116 in November and retroactively lowered corporate tax from 4.63 percent to 4.55 percent effective January 1, 2020.[5]
  • Indiana’s rate dropped to 5.25 percent on July 1, 2020, and a final drop to 4.9 percent is slated to occur on July 1, 2021.[6]
  • Iowa cut its tax rate from 12 percent to 9.8 percent through a 2018 tax reform package and the abolition of federal deductibility.[7]
  • Mississippi continues its 3 percent corporate tax bracket by increasing the tax exemption by $ 1,000 per year and releasing the first $ 4,000 of income in 2021. The 3 percent tax bracket will be completely eliminated by early 2022, but the 4 and 5 percent tax bracket completely stay where you are.[8]
  • New Jersey Governor Phil Murphy (D) retrospectively increased and extended the state’s temporary surcharge for corporate taxable income in excess of $ 1 million. The additional tax had dropped to 1.5 percent in 2020 and should expire by 2022. Instead, Bill 4721 restored the additional tax for the tax years 2020 to 2023 retrospectively to 2.5 percent. As a result, the highest corporate tax rate in New Jersey for 2020 and 2021 was 10.5 percent, and after the temporary ancillary tax expires, it is 9 percent by 2023.[9]

2021 State corporate tax rates and classes

As of January 1, 2021
Status State corporate tax rates State corporate tax brackets
Alabama 6.5% > $ 0
Alaska 0% > $ 0
2% > $ 25,000
3% > $ 49,000
4% > $ 74,000
5% > $ 99,000
6% > $ 124,000
7% > $ 148,000
8th% > $ 173,000
9% > $ 198,000
9.4% > $ 222,000
Arizona 4.9% > $ 0
Arkansas 1.0% > $ 0
2.0% > $ 3,000
3.0% > $ 6,000
5.0% > $ 11,000
6.0% > $ 25,000
6.2% > $ 100,000
California 8.84% > $ 0
Colorado 4.55% > $ 0
Connecticut 7.50% > $ 0
Delaware (a) 8.7% > $ 0
Florida (b) 4.458% > $ 0
Georgia (c) 5.75% > $ 0
Hawaii 4.4% > $ 0
5.4% > $ 25,000
6.4% > $ 100,000
Idaho 6.925% > $ 0
Illinois (d) 9.50% > $ 0
Indiana (e) 5.25% > $ 0
Iowa 5.5% > $ 0
9.0% > $ 100,000
9.8% > $ 250,000
Kansas 4% > $ 0
7% > $ 50,000
Kentucky 5% > $ 0
Louisiana 4% > $ 0
5% > $ 25,000
6% > $ 50,000
7% > $ 100,000
8th% > $ 200,000
Maine 3.50% > $ 0
7.93% > $ 350,000
8.33% > $ 1,050,000
8.93% > $ 3,500,000
Maryland 8.25% > $ 0
Massachusetts 8.00% > $ 0
Michigan 6.00% > $ 0
Minnesota 9.8% > $ 0
Mississippi (f) 3% > $ 4,000
4% > $ 5,000
5% > $ 10,000
Missouri 4.00% > $ 0
Montana 6.75% > $ 0
Nebraska 5.58% > $ 0
7.81% > $ 100,000
Nevada (on)
New Hampshire 7.7% > $ 0
New Jersey (g) 6.5% > $ 0
7.5% > $ 50,000
9.0% > $ 100,000
11.5% > $ 1,000,000
New Mexico 4.8% > $ 0
5.9% > $ 500,000
new York 6.5% > $ 0
North Carolina 2.5% > $ 0
North Dakota 1.41% > $ 0
3.55% > $ 25,000
4.31% > $ 50,000
Ohio (on)
Oklahoma 6% > $ 0
Oregon (a) 6.6% > $ 0
7.6% > $ 1,000,000
Pennsylvania 9.99% > $ 0
Rhode Island 7% > $ 0
South carolina 5% > $ 0
South Dakota None
Tennessee (a) 6.5% > $ 0
Texas (on)
Utah 4.95% > $ 0
Vermont 6% > $ 0
7% > $ 10,000
8.5% > $ 25,000
Virginia 6% > $ 0
Washington (on)
West Virginia 6.5% > $ 0
Wisconsin 7.9% > $ 0
Wyoming None
Washington, DC 8.25% > $ 0

(a) Nevada, Ohio, Texas, and Washington have no corporation tax but do have gross income tax at rates that are not strictly comparable to corporate tax rates. See Table 18 for more information. Delaware, Oregon, and Tennessee have gross income taxes in addition to corporate taxes, as do some states such as Pennsylvania, Virginia, and West Virginia that allow gross income taxes at the local (but not state) level.

(b) Florida corporate tax rate will revert to 5.5% for tax years beginning on or after January 1, 2022.

(c) Georgia’s corporate tax rate will decrease to 6% on January 1, 2026.

(d) The Illinois rate includes two separate corporate taxes, one at a rate of 7% and one at a rate of 2.5%.

(e) Indiana’s interest rate will change to 4.9% on July 1, 2021.

(f) Mississippi continues the 3 percent margin by increasing the exemption by $ 1,000 per year. The 3% bracket will be completely eliminated by early 2022.

(g) In New Jersey, the rates shown apply to a company’s total net income rather than just income above the threshold. There is a temporary and retrospective surcharge from 2020 to 2023 that increases the rate to 11.5% for businesses with incomes above $ 1 million.

Note: In addition to regular income taxes, many states impose other taxes on businesses such as gross income taxes and capital taxes. Some states also impose an alternative minimum tax and special rates for financial institutions.

Sources: Tax Foundation; state tax laws, forms and instructions; Bloomberg Tax.

[1] US Census Bureau, “State and Local Funding Historical Records and Tables 2018,” https://www.census.gov/data/datasets/2018/econ/local/public-use-datasets.html.

[2] Justin Ross, “Gross Income Taxes: Theory and Current Insights,” Tax Foundation, October 6, 2016, https://taxfoundation.org/gross-receipts-taxes-theory-and-recent-evidence/.

[3] Jeffrey L. Kwall, “The Abolition of Graduated Corporate Income Taxes,” Tax Notes, June 27, 2011, 1395.

[4] Michael R. Wickline, Arkansas Democrat-Gazette, January 1, 2021, https://www.arkansasonline.com/news/2021/jan/01/top-corporate-income-tax -rate-sinks /? no later than.

[5] Katherine Loughead, “Colorado Proposition 116: Will Voters Lower State Income Tax Rates?” Tax Foundation, October 5, 2020, https://taxfoundation.org/colorado-proposition-116-state-income-tax/.

[6] Scott Drenkard, “The Indiana Tax Package for 2014 Continues the State’s Pattern of Last Year Improvements,” Tax Foundation, April 7, 2014, https://taxfoundation.org/indiana-s-2014-tax-package-continues -state -s-pattern improvements from last year /.

[7] Jared Walczak, “Iowa Governor Outlines Plan to Reduce Tax Rates and Abolish Federal Deductibility,” Tax Foundation, Feb. 14, 2018, https://taxfoundation.org/iowa-cut-rates-repeal-federal-deductibility/.

[8] Joseph Bishop-Henchman, “Mississippi Approves Franchise Tax Cut, Income Tax Cut,” Tax Foundation, May 16, 2016, https://taxfoundation.org/mississippi-approves-franchise-tax-phasedown-income-tax-cut/.

[9] Marks Paneth LLP, “New Jersey Will Increase Personal And Corporate Income Taxes Retroactively January 1, 2020,” October 1, 2020, https://www.markspaneth.com/insights/industry/service/nj-enacts-personal- Corporate tax rate increases retroactively January 2020.

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