The Tax Foundation recently conducted a study of the tax climates in each of the fifty states and then rated and ranked them based on five categories: corporate tax, individual income, sales tax, unemployment insurance tax, and property tax. The Tax Foundation’s rankings are designed to show how well state tax systems are structured, rather than simply rank the states by the amount of taxes assessed.
Connecticut finished 43rd in overall tax climate and it ranked in the individual tax categories as follows: 32 (corporate tax), 37 (individual income tax), 27 (sales tax), 21 (unemployment insurance tax), and 49 (property tax). Connecticut was also ranked 43rd in each of the three preceding years.
Corporate income taxes are levied in 44 states while Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes. South Dakota and Wyoming are the only states that do not levy a corporate income or gross receipts tax. Surprisingly, corporate income taxes provide only 5.3 percent of state tax collections and 3.9 percent of state general revenue.
Twenty-seven states, including Connecticut, and the District of Columbia have single-rate corporate tax systems. Theoretically, a single-rate system may remove the incentive for firms to engage in financially improvident tax planning to reduce the negative effects of higher marginal tax rates levied by states as taxable income increases.
Connecticut along with Minnesota, Alaska, New Jersey, and the District of Columbia have corporate income tax rates of 9 percent or higher. While these are the top rates in the country, six states have rates at or below 5 percent: North Carolina at 4 percent, North Dakota at 4.31 percent, Colorado at 4.63 percent, and Mississippi, South Carolina, and Utah at 5 percent.
It is wise for both individual and business taxpayers located in Connecticut to consult with a tax professional to help assess their current tax situation, looking ahead to the future. If you have any question about taxes, especially in planning ahead for the next filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
