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fy2010 business tax burden study

The Council On State Taxation (COST) is pleased to announce the release of our ninth 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 $619 billion in state and local taxes in FY2010.

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 and recovery on tax collections.

Key findings of the study include:

  • After falling by 0.9% in FY2009, state and local business taxes stabilized at near FY2009 levels in FY 2010, decreasing by 0.3% from FY2009. Total state and local taxes imposed on both households and businesses remained constant, with total state taxes declining by 1.2% and total local taxes increasing by 2.3%. 
  • Property taxes on business property increased an estimated 1% this year, totaling $249.5 billion in FY 2010, or 40.3% of state and local business taxes. Sales tax on business inputs and capital equipment totaled $124.4 billion, representing 20.1% of business taxes – a decrease of 2.5% from FY2009. 
  • Corporate income tax collections totaled $44.1 billion, adding up to only 7.1% of state and local business taxes, and the lowest share reported in the nine-year history of this study. 
  • Due to the decline in income taxes, indirect taxes (taxes not based on income) represent 88% of the total state and local tax burden, a larger share than in previous years. 
  • Employer contributions to unemployment insurance were $32.4 billion, up 3.1%. States are facing large debts to the federal government for loans used to pay unemployment benefits due to a combination of underfunding and the severity of unemployment. Unemployment taxes are likely to continue to rise for several years to cover loan repayments.
Click here  to view the full study. Questions regarding the study should be directed to Joe Crosby .