New Jersey corporations pay the highest rate in the nation in combined state and federal corporate taxes, according to an analysis the Tax Foundation released today.
“Corporate taxes are one of the most economically damaging ways to raise revenue and are a promising area of reform for states to increase competitiveness and promote economic growth, benefiting both companies and workers,” Tax Foundation Senior Policy Analyst Garrett Watson wrote in a blog post.
“The state with the highest combined state and federal corporate tax rate is New Jersey at 30.1%,” Watson stated. “Corporations in Alaska, California, Illinois, Iowa, Maine, Minnesota, and Pennsylvania face combined corporate tax rates at or above 28%. Six states—Ohio, Nevada, South Dakota, Texas, Washington, and Wyoming—face no state corporate income tax and only face the federal tax rate of 21%.”
Because corporations can deduct the cost of their state corporate taxes from their federal taxable income, the combined rate is slightly less than their sum. So New Jerseys top corporate tax rate of 11.5%, the highest of any state, combined with the federal tax rate of 21% works out to 30.1% instead of 32.5%.
Neighboring Pennsylvania has the second highest corporate tax rate (9.99%) so it has second highest combined tax rate in the nation of 29%. However, Pennsylvania will reduce its rate to 8.99% for 2023 and continue cutting it until it reaches 4.99% in 2031. Corporations in neighboring New York pay a combined rate of 27% and in Delaware, they pay 28%, according to the foundation.
NJBIA has been raising its call with policymakers and tax officials this year to ensure New Jersey’s 11.5% corporate tax rate does sunset as scheduled at the end of 2023. NJBIA President and CEO Michele Siekerka said the Tax Foundation analysis shows that New Jersey lawmakers need to look beyond raising revenues when it comes to tax policy.
“Lawmakers need to consider the impact the state’s tax policies have on competitiveness and our state’s economy,” Siekerka said. “New Jersey businesses already struggle with the worst tax environment in the nation.”