NCPA - National Center for Policy Analysis


April 29, 2005

The state and local tax burden on business is substantial, with businesses paying over half of all state and local tax increases since Fiscal Year 2000, according to a new study by the Council On State Taxation (COST).

Doug Lindholm, COST's President and Executive Director, says it has become fashionable over the past several years to allege that business are not paying enough taxes to state and local government. But as the COST study shows, the reality of business taxes is quite different than the perception:

  • Businesses pay 43 percent of all state and local taxes.
  • State and local taxes imposed on businesses exceeded $447 billion in FY2004, nearly 10 percent higher than in FY2003.
  • In 26 states, business paid over half of all tax increases over the past four years.

State lawmakers are frequently asked to make decisions on complex business tax issues, and unfortunately, says Lindholm, they too often focus on the corporate income tax, which is only one of many taxes businesses pay to state and local government. He hopes the COST study will give policymakers a better understanding of the composition of business taxes.

  • Property taxes on business property were $165 million in FY2004, accounting for 37 percent of state and local business taxes.
  • Sales taxes on business purchases inputs and capital equipment totaled $105 billion, 23 percent of the total.

Clearly, other business taxes besides the corporate income tax should be considered by policymakers, and COST believes its study will help them better understand the true burden of taxes on business in their states and localities.

Source: Press Release, "Businesses Pay $447 Billion in State & Local Taxes," Council On State Taxation, Issue 05-13, April 12, 2005; and Ernst & Young LLP, et al., "Total State and Local Business Taxes: Nationally 1980-2004 and by State 2000-2004, Council on State Taxation, April 12, 2005.

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