How Much Does Your State Collect in Corporate Income Taxes Per Capita?

September 5, 2018

Katherine Loughead

Katherine Loughead

Today’s map shows state corporate income tax collections per capita in the fifty states.

Collections are highest in New Hampshire at $525 per capita and Massachusetts at $342 per capita. Delaware comes next, collecting $334 per capita in corporate income taxes and levying an economically harmful gross receipts tax.

Six states—Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming—do not levy a corporate income tax, but four of the six (Nevada, Ohio, Texas, and Washington) levy a gross receipts tax. In some states without a corporate income tax, a small amount of corporate income tax collections per capita may be shown due to taxes on specific types of businesses, such as financial institutions, which are sometimes structured as corporations.

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Compared to other sources of tax revenue—such as income, sales, and property taxes—states rely relatively little on corporate income taxes. According to the U.S. Census Bureau, in fiscal year 2015, the corporate income tax generated only 5.3 percent of total state tax collections. One reason for low reliance on corporate income taxes is that many businesses have shifted away from the traditional C corporation structure and are instead structured as pass-throughs, which pay income taxes using the individual income tax system.

For those businesses that are subject to the corporate income tax, it is one of many taxes they pay. In fiscal year 2016, corporate income taxes accounted for only 14.9 percent of all taxes paid by businesses to state governments. Sales, property, unemployment insurance, excise, and payroll taxes are among the other taxes paid by pass-throughs and corporations. 

Revenue volatility is another reason states have reduced their reliance on corporate income taxes. Corporate income can vary drastically from one year to the next due to business cycle fluctuations, leading to unstable revenue collections. Finally, corporate income taxes have been shown to be more detrimental to economic growth than other major state tax types, including personal income taxes, consumption taxes, and property taxes, and they are administratively complex for both taxpayers and states.

Note: This is part of a map series in which examine per capita state tax collections 

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

A consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes, excise taxes, tariffs, value-added taxes (VAT), or an income tax where all savings is tax-deductible.

An S corporation is a business entity which elects to pass business income and losses through to its shareholders. The shareholders are then responsible for paying individual income taxes on this income. Unlike subchapter C corporations, an S corporation (S corp) is not subject to the corporate income tax (CIT).

A gross receipts tax is a tax applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding.

A property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services.

A payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue.

An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.

A corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax.