2022 State Elections Toolkit
image/svg+xml Skip to main content
Search image/svg+xml

Key Takeaways:

  • A handful of states have already passed legislation since November 2021 to reduce their corporate income tax rate.
  • After excluding bills that have virtually no chance of passage, there are nine outstanding proposals in states to reduce their corporate income tax rate.
  • Standalone legislation won’t be the only thing to watch! More than 30 states are required to adopt Fiscal Year 2023 budgets this year, and it’s very likely that tax rates will be part of the larger budget conversation in many of those states.
  • Despite record levels of tax revenue and additional federal aid to state and local governments, a few progressive legislators have continued to champion corporate income tax rate increases.

Note: this post has been updated (February 25, 2022) to reflect recently passed Iowa legislation that is expected to be signed by the governor.

Thanks in part to unprecedented revenue surpluses and state-level elections across the country, we’re seeing a very large number of bills that would change the corporate income tax rate. The majority of the proposals would reduce the corporate income tax rate, but a few bills have been introduced to increase the rate. It’s also worth noting that there are a similarly large number of proposals to decrease individual income tax rates, but this post focuses solely on changes to the corporate income tax rate. Lastly, this list is simplified in order to exclude bills that have virtually no chance of passage, such as excluding bills introduced by the minority party and bills that are inactive this session. 

Ahead of the Curve: Several States Have Already Enacted Corporate Rate Cuts Recently

Idaho and Utah are two states that have been early 2022 movers on the rate cut trend. Idaho passed its rate cut bill the first week of February, dropping the state’s corporate income tax rate from 6.5 to 6 percent, effective January 1, 2022. Utah’s corporate income tax rate cut was passed by the legislature and signed by the Governor on February 11th. The bill reduces the corporate income tax rate from 4.95 to 4.85 percent. Both Idaho and Utah passed these rate cuts as part of larger packages that also included changes to the individual income tax rate. Additionally, Iowa HF also 2317 passed the legislature on February 24th and is awaiting the Governor's signature. The bill gradually phases down the state's corporate income tax rate to a single flat rate of 5.5 percent. The rate will decrease subject to revenue triggers, and the amount of rate cut will vary based on a formula that calculates which rate will generate a determined amount of revenue for the state. The governor is expected to sign the bill.

Additionally, the very end of 2021 brought several rate reductions: North Carolina passed SB 105 in November, which gradually phases out the state’s current 2.5 percent tax rate, reducing it to 0 percent by 2027. Arkansas passed legislation in December which gradually reduces its corporate tax rate from 5.9 percent to 5.3 percent subject to certain revenue requirements.


Cutting the Rates: States Proposing a Reduction to the Corporate Income Tax Rate

You shouldn't only be paying attention to standalone corporate tax rate bills — more than 30 states are required to adopt Fiscal Year 2023 budgets this year, and it’s very likely that tax rates will be part of the larger budget conversation in many of those states. The table below is a list of proposed legislation to cut corporate income tax rates. This list is simplified in order to represent only those bills which are most likely to pass, excluding bills introduced by the minority party and bills that are inactive this session. 

Legislation

Summary

Indiana SB 372

Gradually reduces the corporate income tax rate until it reaches 0 percent in 2026

Michigan SB 768

Reduces the corporate income tax rate from 6 percent to 3.9 percent.

Missouri SB 701

Repeals the state’s corporate income tax. 

Nebraska LB 680

Reduces the top corporate income tax rate from 6.84 percent to 5.58 percent.

Nebraska LB 938

Gradually reduces the corporate income tax rate from 7.81 percent to 5.84 percent by 2026.

Oklahoma SB 1489

Reduces the corporate income tax rate to 4 percent before repealing it entirely in 2023.

Pennsylvania HB 2300

Reduces the corporate income tax rate from 9.99 percent to 9.49 percent by 2024. 

Virginia HB 295

Gradually reduces the corporate income tax rate from 6 percent to 2 percent by 2025.

Washington 5957

Reduces the Business & Occupation Tax rate (the state's gross receipts tax) for manufacturers from 0.484 percent to 0.275 percent.

Even More Revenue: States Proposing an Increase to the Corporate Income Tax Rate

Despite record levels of tax revenue and additional federal aid to state and local governments, some progressive legislators have continued to champion corporate income tax rate increases. Though rate hikes may be popular with portions of the Democratic base, enacting a tax increase during an era of historic budget surpluses isn’t on the agenda for more moderate Democrats. Here are a few rate increase proposals we’re watching: 

Legislation

Summary

Hawaii SB 2242/ HB 1505:

Increases the corporate income tax rate from 6.4 percent to 9.6 percent and establishes a single rate (currently, Hawaii has a tiered corporate income tax structure). 

Massachusetts HB 2969

Increases the corporate income tax rate to 10.5 percent (introduced in 2021, carried over to 2022). 

Massachusetts SB 1839

Increases the corporate income tax rate to 9.5 percent (introduced in 2021, carried over to 2022).