American corporations pay the third-highest corporate tax rate of any nation in the world, a full 16.5% higher than the worldwide average of 22.6%. And while that is a fixed rate, the states’ rates vary from 9.9% to as low as 0%. Compare tax rates by state. Benefitting from a low corporate state tax rate can make a big difference for your bottom line and should be a consideration as you choose a location for your business.
In many states, the corporate income tax rate you pay is dependent on the amount of revenues you claim. Others impose a flat tax rate that ranges from 0% to 9.9%. To keep your revenues in your pocket rather than in Uncle Sam’s, it is prudent to calculate what you’ll pay in corporate income taxes for the state you’re considering locating to.
Why is this information important? Well, besides the obvious notion that if you’re paying less in taxes you’ll have more cash on hand to reinvest in the business, there is another important reason to understand your state’s corporate income tax rate: your employees.
Studies have shown that the higher a company’s corporate tax burden the less its employees earn. In other words, it is you and your company’s people who bear the brunt of a higher corporate tax rate.
Here in North Carolina, we recognize how burdensome high corporate tax rates are to businesses. After years of a modest, flat 6.9% corporate tax rate, in 2013, the governor signed into a law a gradual reduction of the corporate tax rate in North Carolina. Under the new law, the low state corporate tax rate will be 6% for tax year 2014; 5% for 2015; 4% for 2016; and 3% for all subsequent tax years.
When you’re considering a new location for your business, you can take advantage of North Carolina’s skilled workforce, modern transportation infrastructure, friendly business environment, warm climate, low cost of living, and high quality of life. And with the aggressive downward trend of the low corporate income tax, you can also save a significant amount of tax money. Why pay more in state taxes somewhere else?