Tax Foundation Reveals NJ Has Highest Corporate Income Tax Rate
On Feb 3, 2021
New Jersey’s corporate income tax rate of 11.5% is the highest in the nation, according to an updated annual survey by the Tax Foundation. This occurred after Gov. Phil Murphy retroactively increased and extended the state’s 2.5% surcharge on corporate income exceeding $1 million for tax years 2020 through 2023.
Survey findings reveal that:
Forty-four states levy a corporate income tax. Rates range from 2.5% in North Carolina to 11.5% in New Jersey.
Six states—Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania—levy top marginal corporate income tax rates of 9% or higher.
Ten states—Arizona, Colorado, Florida, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, South Carolina, and Utah—have top rates at or below 5%.
Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes.
South Dakota and Wyoming are the only states that levy neither a corporate income nor gross receipts tax.
Several other states also implemented corporate income tax rate changes over the past year:
Arkansas saw its rate drop to 6.2% on Jan. 1, 2021 as a third phase of tax reforms started in 2019 kicked in.
Colorado voters approved Proposition 116 in November, retroactively lowering the corporate income tax from 4.63 to 4.55% as of Jan. 1, 2020.
Indiana’s rate decreased to 5.25% on July 1, 2020, and a final reduction to 4.9% is scheduled to kick in July 1, 2021.
Iowa has lowered its rate from 12 to 9.8% through a tax reform package adopted in 2018 and the repeal of federal deductibility.
Mississippi continues phasing out its 3% corporate income tax bracket by increasing the exemption by $1,000 a year, exempting the first $4,000 of income in 2021.
Corporate income taxes are levied in 44 states. Though often thought of as a major tax type, corporate income taxes accounted for an average of just 4.66% of state tax collections and 2.27% of state general revenue in fiscal year 2018.