Trends in State Tax Rates: Corporate Income Taxes

State revenues appear to be rebounding, but generally remain below pre-recession levels. At the start of 2011, state corporate income tax rates1 largely mirrored those assessed in 2007 - three states had raised rates, while five had lowered them. More change may be on the way in the 2012 fiscal year, as debate continues on issues like nexus thresholds and taxation of out-of-state entities.

 
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See the other Capitol Research policy briefs in this series:  The Book of the States 2011: Regional Analysis
 
National Analysis:
  • As of January 2011, 42 states assessed an average 7.41 percent corporate income tax rate. The 2011 average is up from 7.38 percent in 2007 due to increases in the top rate in three states—Illinois (+2.2 percent), Oregon (+1 percent) and Maryland (+1.25 percent).
  • Nominally, projected 2011 corporate income tax collections are down 15.8 percent, or about $8.3 billion, from 2007. After inflation, projected 2011 collections are down 22.7 percent, or about $13 billion, from 2007.
  • At the onset of 2011, 29 of the 42 states charging a corporate income tax assessed a flat rate, down one from 2007 due to adoption of a graduated rate in Oregon.

Regional Analysis:

  • As of January 2011, eight of 11 CSG Midwest states charged an average 8.24 percent corporate income tax rate. The 2011 average is up from 8.04 percent in 2007 due to an increase in the flat rate in Illinois (+2.2 percent), slightly offset by a decrease in the top rate in North Dakota (-0.6 percent).
  • Nominally, projected 2011 corporate income tax collections are down 6.5 percent, or about $390 million, from 2007. After inflation, projected 2011 collections are down 14.2 percent, or about $931 million, from 2007.
  • At the onset of 2011, five of the eight CSG Midwest states charging a corporate income tax assessed a flat rate. The number assessing a flat rate is unchanged from 2007.
  • Through the 2011 fiscal year, Michigan assessed a business activity tax on federal taxable income, dividends, interest, royalties and other items. Starting in fiscal 2012, the state will charge a 6 percent income tax on C-corporations instead of a business activity tax. Information on the business activity tax is reported below, but excluded from all totals and averages due to lack of comparability.
 
  • As of January 2011, 10 of 11 CSG East states assessed an average 8.57 percent corporate income tax. The 2011 average is up from 8.56 percent in 2007 due to a flat rate increase in Maryland (+1.25 percent), slightly offset by flat rate decreases in Massachusetts (-0.75 percent) and New York (-0.4 percent).
  • Nominally, projected 2011 corporate income tax collections are down 16.8 percent, or about $2.6 billion, from 2007. After inflation, projected 2011 collections are down 23.7 percent, or about $4 billion, from 2007.
  • At the onset of 2011, eight of the 10 CSG East states charging a corporate income tax assessed a flat rate. That figure is unchanged from 2007.
  • New Hampshire charges a business profits tax on income. Information on the business profits tax is presented below, but excluded from all totals and averages due to lack of comparability.
  • As of January 2011, 14 of 15 CSG South states charged an average 6.34 percent corporate income tax rate. The 2011 average is down from 6.44 percent in 2007 due to reductions in the top-tier rate in Kentucky (-1 percent) and the flat rate in West Virginia (-0.5 percent).
  • Nominally, projected 2011 corporate income tax collections are down 32.6 percent, or about $4 billion, from 2007. After inflation, projected 2011 collections are down 38.2 percent, or about $5 billion, from 2007.
  • At the onset of 2011, 10 of the 14 CSG South states charging a corporate income tax assessed a flat rate. The number assessing a flat rate is unchanged from 2007.

  • As of January 2011, 10 of 13 CSG West states charged an average 7.07 percent corporate income tax rate. The 2011 average is up from 6.98 percent in 2007 due to adoption of a graduated system and a concurrent top rate increase in Oregon (+1 percent).
  • Nominally, projected 2011 corporate income tax collections are down 4.4 percent, or about $651 million, from 2007. After inflation, projected 2011 collections are down 12.2 percent, or about $1.9 billion, from 2007.

References:

1 For the purposes of this analysis, only taxes on income are considered. Nevada, Washington and Wyoming do not levy a corporate income tax. Hence, no data are reported for these states. Projected tax collections are taken from the 2011 Fiscal Survey of the States, a survey of state ‹finances carried out by the National Association of State Budget Officers and the National Governors Association. 2011 tax rates taken from The Book of the States 2011, Table 7.14. 2007 tax rates taken from The Book of the States 2007, Table 7.20. 2007 corporate tax collections taken from The Book of the States 2008, Table 7.4. 2007 general fund revenues taken from The Book of the States 2009, Table 7.1.