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Richard Rider

California has the highest state corporate income tax rate compared to its economic competitors


The new 2019 Tax Foundation report on state corporate income taxes ranks California as the 7th highest rate — 8.84%.  It’s a tax rate that starts at $1 of profit — some other high corporate tax states have tiered rates that can provide some relief for the smaller corporations.

 But more important, when looking at  California’s economic competitors — those states west of the Mississippi — California has THE highest corporate income tax rate (Alaska is not an economic competitor of California).

Not included is the fact that — unlike most other states — CA tries to tax corporations for money earned in other states as well as earnings in California.  This is just one more reason why it’s folly for a company to establish a business operation in the Golden State.

Retailers have no choice — CA usually is too big a market to ignore. But non-retail companies generally are not keen on putting themselves on the Franchise Tax Board’s radar screen.

Here’s the link to the full report, followed by the press release (including an excellent map) that the Tax Foundation just sent out (2/27/19):

Tax Foundation Maps

State Corporate Income Tax Rates and Brackets for 2019

Corporate income taxes are levied in 44 states, with rates ranging from 2.5 percent in North Carolina to 12 percent in Iowa.

Though often thought of as a major tax type, corporate income taxes account for an average of just 3.38 percent of state tax collections and 2.24 percent of state general revenue.

Several states implemented corporate income tax rate changes over the past year: Connecticut, Georgia, Idaho, Mississippi, Indiana, New Hampshire, New Jersey, North Carolina, and Utah.

States with the highest top marginal corporate tax rates:

  • Iowa (12.00%)
  • New Jersey (11.50%)
  • Pennsylvania (9.99%)
  • Minnesota (9.80%)
  • Illinois (9.50%)

States with the lowest top marginal corporate tax rates:

  • North Carolina (2.50%)
  • North Dakota (4.31%)
  • Colorado (4.63%)
  • Arizona (4.90%)
  • Utah (4.95%)
Top Marginal Corporate Income Tax Rates as of January 1, 2019
Click the map above to see how California ranks on corporate income taxes.

Six states—Alaska, Illinois, Iowa, Minnesota, New Jersey, and Pennsylvania—levy top marginal corporate income tax rates of 9 percent or higher.

Eight states—Arizona, Colorado, Kentucky, Mississippi, North Carolina, North Dakota, South Carolina, and Utah—have top rates at or below 5 percent.

Only two states—South Dakota and Wyoming—do not levy a corporate income or gross receipts tax.

Four states—Nevada, Ohio, Texas, and Washington—impose gross receipts taxes instead of corporate income taxes. Gross receipts taxes are generally thought to be more economically harmful than corporate income taxes.