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Open for business: state boasts low corporate tax rate

When compared to its Southern neighbors, Mississippi’s corporate income tax rate looks good. Real good.
Compared to 11 Southern states, Mississippi has the lowest corporate income tax rate with the exception of Arkansas, and contributes the highest percentage to state tax revenue with the exception of Tennessee.

“To an enterprise trying to make a profit, taxes are just another cost of doing business,” said Mississippi Development Authority spokesperson Scott Hamilton. “That’s why keeping taxes low during the legislative session was so important for business in Mississippi. Compared to the national averages, Mississippi corporate taxes are very competitive, and we definitely use that to try to attract businesses nationally.”

Mississippi’s corporate income tax rates are: 3% on the first $5,000 of taxable income; 4% on the next $5,000 of taxable income; 5% on $10,000 or more of taxable income.
Many other Southern states, such as Alabama, Georgia, North Carolina, South Carolina and Tennessee, have a flat rate ranging from 5.5% to 6.9%.

“I don’t think we’ve ever discussed flat tax as an option,” said Jan Craig, director of the income tax bureau for the Mississippi State Tax Commission.

The states with a graduated scale of tax range from lowest tax rate of 1% to 4%, to the highest rate of 6.5% to 8.25%.

“Collections for income and franchise tax in Mississippi for fiscal year 2004 were $315.5 million, which increased over fiscal year 2003 by $26.7 million,” said Craig. “We are seeing an increase in the number of taxpayers making estimated payments throughout the year.”

For corporations that are delinquent on paying their taxes, the Mississippi State Tax Commission announced August 23 the Tax Amnesty Program, passed by state lawmakers earlier this year. The program began September 1 and ends December 31.

“During the amnesty period, any individual or business can pay all delinquent state taxes that were due and payable after January 1, 1999, without any penalty being added or any criminal charges being brought against the individual or business as long as total payment of all delinquent taxes is made,” said Joe Blount, commissioner of revenue for the state tax commission.

Soon after the amnesty program was publicized, Craig’s office began “getting questions” from delinquent taxpayers, she said.

In fiscal year 2003 (FY03), the Mississippi State Tax Commission collected $333.7 million in corporate tax and diverted $288.7 to the general fund, which accounted for 9% of total general fund receipts ($3.3 billion). By press time, the FY04 annual report had not been released.

According to a national study by Ernst & Young, Mississippi’s state and local taxes totaled $3.1 billion for FY03. These taxes included property, sales, gross receipts, excise, corporate income, license, payroll and other state and local taxes paid by businesses at the state and local levels of government.

The state’s business share was 45.5%, 2.9% higher than the national average of 42.6%. Over the last three years, those taxes increased by $383.3 million. Businesses paid 70.8% of the total increase in all state and local taxes collected in Mississippi, representing an increase of $271.4 million.

Here’s how our neighboring states fared in FY03:

• Alabama’s state and local business taxes totaled $4.4 billion, with its corporate income growing more rapidly than other Alabama business taxes, increasing 57% over a three-year period.

• Arkansas reported $2.6 billion in state and local business taxes collected, with sales tax on business inputs growing more rapidly than other business taxes.

• In Florida, the business share of the $21.9 billion in state and local taxes collected was 47.9%, 5.3% higher than the national average.

• Georgia’s state and local business taxes totaled $9.9 billion.

• Kentucky reported $4.6 billion in state and local business tax collections, an increase of $637.6 million over a three-year period.

• In Louisiana, state and local business taxes totaled $7.3 billion, with the business share accounting for 57.2%, or 14.6% higher than the national average.

• North Carolina reported state and local business tax collections of $8.4 billion. From FY00 to FY03, excise and gross receipts taxes grew more rapidly than other business taxes, increasing by 52.7%.

• South Carolina’s state and local business tax total of $4.1 billion reflected a $293 million increase in business taxes while non-business taxes dropped $441 million. Corporate income grew more rapidly than other business taxes, increasing by 13.2% over a three-year period.

• In Tennessee, state and local business taxes totaled $7 billion, with the business share accounting for 50%, or 7.6% higher than the national average. Since FY00, property tax grew more rapidly than other business taxes, increasing by 13.2%.

• Virginia’s state and local business taxes totaled $8.2 billion, with sales taxes growing more rapidly than other business taxes, increasing by 17.8% over the same time period.

Contact MBJ contributing writer Lynne W. Jeter at mbj@thewritingdesk.com.

About Lynne W. Jeter

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