State Corporate Income Taxes Increase Tax Burden on Corporate Profits

The Tax Cuts and Jobs Act (TCJA) reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent. However, most U.S. states also tax corporate income. These state-level taxes mean the average statutory corporate income tax rate in the U.S., which combines the average of state corporate income tax rates with the federal corporate income tax rate, is 25.9 percent in 2019. State-level corporate income tax rates vary across the country. Six states (Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming) levy no corporate income tax, while the other 44 states and the District of Columbia do tax corporate profits. State-level rates range from a low of 3 percent in North Carolina to a high of  12 percent in Iowa. While the majority of states levy a flat rate on corporate profits, 14 states have progressively structured corporate income taxes. Several states—Nevada, Ohio, Texas, and Washington—tax businesses via a gross receipts tax. So while they…

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