State Corporate Taxes

Abstract

At the federal level, the corporate tax is our most complex and economically damaging tax. State corporation taxes take this bad situation and make it worse. To collect their corporate tax, each state starts with the federal corporate tax and then makes adjustments and modifications to meet its own set of policy and revenue objectives. Then each must engage in the always contentious fight with corporations about what share of national profits falls inside its jurisdiction. For all this aggravation—for all this fingernail-scratching-on-the-blackboard pain—the states collectively never raise more than one-third of the revenue that the IRS collects from the federal corporate tax—and in some years considerably less.