Corporate income tax rate remains high in Delaware
Delaware continues to have a high corporate income tax rate as well as a gross receipts tax.
A new analysis from Tax Foundation Policy Analyst Morgan Scarboro shows the corporate tax brackets and tax rates for these states and the District of Columbia.
At 12 percent, Iowa has the highest top marginal rate in the country, followed by Pennsylvania (9.99 percent), Minnesota (9.8 percent), Alaska (9.4 percent), Connecticut (9 percent), New Jersey (9 percent), and D.C. (9 percent).
Delaware’s corporate income tax rate is slightly under 9 percent.
Delaware and Virginia are the only two states with the combination of the income and gross receipts tax.
The gross receipts tax is widely despised because it taxes total revenue and efforts to reduce its rate have been shoved aside by structural budget deficits in Delaware.
“Though often thought of as a major tax type, corporate income taxes account for just 5.4 percent of state tax collections and 2.7 percent of state general revenue,” Scarboro writes.
For 2017, corporate tax rates in four states–Arizona, Indiana, New Mexico, and North Carolina–and D.C. will decline as part of recent tax reform legislation. Since 2008, 15 states have reduced their corporate tax rates, recognizing that the tax raises fairly little revenue but plays a bigger role in business location and expansion decisions.\
The Tax Foundation did not take note of changes made in its corporate tax structure that will lead to losses in revenue in coming years.
The changes were decried by a few legislators. However, the administration of former Gov. Jack Markell claimed the changes were needed as a way to keep businesses in the state.
The changes were believed to have been a factor in DuPont spin-off Chemours maintaining its headquarters in the state. Also, future spin-off companies arising from the pending merger of Dow and DuPont opting for headquarters in Delaware.
The Tax Foundation notes that corporate income taxes typically account for only a small percentage of total state proceeds.
In Delaware, the corporate income tax accounts for $122 million of the next fiscal years’ $1.2 billion budget proposal.
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