Corporate Income Taxes

The corporate income tax is levied on business profits.

Forty-four states and the District of Columbia (DC) levy a corporate income tax. Two states, Ohio and Texas, taxed corporations’ gross receipts instead of income. Nevada, South Dakota, Washington, and Wyoming had no corporate income tax or gross receipts tax in 2015.

This backgrounder answers two questions:

All revenue data are from the US Census Bureau’s Annual Survey of State Government Tax Collections. All dates in sections about revenue reference the fiscal year unless stated otherwise.

How much revenue do state and local governments raise from corporate income taxes?

Both state and local governments raise a relatively small share of revenue from corporate income taxes. State governments collected $49 billion in revenue (2.6 percent of state general revenue) from corporate income taxes in 2012 (table 1). Local governments collected only $7 billion in revenue (0.5 percent of local government general revenue), mostly because just seven states allowed local governments to levy the tax. Among those seven states, New York (3.7 percent) was the only state where local governments got more than 1 percent of general revenue from corporate income taxes. DC’s corporate income tax provided 4.2 percent of its general revenue in 2012.

TABLE 1

State and Local Corporate Income Tax Revenue, 2012

 

Revenue ($ billions)

Share of general revenue

State and local governments

$49.0

1.9%

State governments

$41.8

2.6%

Local governments

$7.2

0.5%

Corporate income taxes contributed 1.9 percent to combined state and local general revenue in 2012 (figure 1). That was a far smaller share than came from sales taxes (18.3 percent), property taxes (17.2 percent), or individual income taxes (11.8 percent).

Figure 1

Figure 1: Taxes as a Percentage of State and Local General Revenue, 2012

New Hampshire collected 5.5 percent of its state and local general revenue from corporate income taxes in 2012, the most of any state. Alaska, Delaware, DC, Illinois, Massachusetts, and New York also got more than 3 percent of state and local general revenues from corporate income taxes that year.

Of the 44 states with a corporate income tax, Hawaii (0.6 percent) relied least on the tax as a percentage of state and local revenues. Georgia, Louisiana, Missouri, and South Carolina also collected less than 1 percent of their general revenues from corporate income taxes. Ohio (0.4 percent) and South Dakota (1 percent) had corporate income tax revenue in 2012 even though neither has a broad corporate income tax because both states have special taxes for financial institutions.

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How much do corporate income tax rates differ across states?

In 2015, top corporate income tax rates ranged from 4.53 percent in North Dakota to 12 percent in Iowa (figure 2). Four other states (Alaska, Minnesota, New Jersey, and Pennsylvania) and DC had top corporate income tax rates at or above 9 percent. In addition to North Dakota, six states with corporate income taxes (Colorado, Florida, Mississippi, North Carolina, South Carolina, and Utah) had rates below 6 percent.

Figure 2

Figure 2: Top State Corporate Income Tax Rates, 2015

Nevada, South Dakota, Washington, and Wyoming had no corporate income tax in 2015. Ohio and Texas tax corporations’ gross receipts instead of income; figure 2 counts them as no-tax states.

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