PROVIDENCE – When it comes to corporate taxes, Rhode Island ranks in the middle of the pack compared with other states, according to a new analysis by the Tax Foundation.
The Ocean State’s 7% corporate tax rate was the 11th-highest among the 29 states that impose a single-rate tax system, as opposed to one with multiple tiers, according to the Tax Foundation. Pennsylvania had the highest single-rate corporate tax at 9.9%, while North Carolina had the lowest at 2.5%. Neighboring Massachusetts’ rate was 8%, closely followed by Connecticut at 7.5%.
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This does not include the 15 states that use a bracketed system in which rates are higher for higher income brackets. Six states also do not charge corporate tax rates at all, with four of those opting to tax gross receipts in lieu of a corporate income tax.
The Tax Foundation in its report suggested support for a single-rate corporate tax system over one with multiple tiers, since it reduces the incentive for businesses to spend time on “economically wasteful tax planning to mitigate the damage of higher marginal tax rates,” according to the report.
Corporate income taxes accounted for under 5% of state tax collections, and 2.3% of general revenue, on average in fiscal 2020, according to the Tax Foundation.
Nancy Lavin is a staff writer for PBN. Contact her at Lavin@PBN.com.
