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fy2009 business tax burden study

The Council On State Taxation (COST) is pleased to announce the release of our eighth annual study of state and local business taxes.  The report, prepared by Ernst & Young LLP, shows all state and local business taxes paid in each of the 50 states and the District of Columbia.  These taxes include business property taxes, sales and excise taxes on business inputs, gross receipts taxes, corporate income and franchise taxes, unemployment insurance taxes, pass-through business taxes and other state and local taxes that are the statutory liability of business taxpayers. Businesses paid $590 billion in state and local taxes in FY2009.

In addition to presenting tax estimates for the most recent fiscal year, the study also examines business taxes over the past business cycle and describes the impact of the recession that started in December 2007 on state and local business tax collections

Key findings of the study include:

  • After growing by 3.4% in FY2008, state and local business taxes decreased by 3.5% in FY2009. (Non-business taxes fell by 4.7% in FY2009.

  • Property taxes on business property increased 2.7%, totaling $215.3 billion, which is equivalent to 36.5% of total state and local business taxes. Sales tax on business inputs and capital equipment totaled $126.9 billion, or 21.5% of business taxes, which is a decrease of 4.7% from FY2008. The property tax and a significant portion of sales taxes paid by business are taxes on capital invested within a state.

  • Although the corporate income tax has been the focus of significant debate in a number of state legislatures during recent years, FY2009 collections were $50.6 billion, representing just 9% of state and local taxes on business.

  • Due to the decline in income taxes, indirect taxes represent a larger share of the total state and local tax burden than in recent years.

  • The estimated value of public services directly benefiting business is, on average, 59% of the total state and local business tax burden – meaning businesses paid an estimated 1.7 times more in taxes than they received in government services.

Click here to view the full study. Questions regarding the study should be directed to Joe Crosby.