Tax News

CCH (cch.taxgroup.com) reports:

  Businesses paid $577 billion of state and local taxes in fiscal year (FY) 2007, an increase of 5.7% since FY2006, according to a recently released study prepared by Ernst & Young LLP in conjunction with the Council On State Taxation (COST). Businesses paid 44.1% of total taxes collected by all state and local governments. Property taxes on business property accounted for 35% of total state and local business taxes in FY2007, while sales and use taxes on business inputs and capital equipment represented almost 23% of business taxes during the same period. Corporate income taxes represented 10% of business taxes nationally, while individual income taxes paid by owners of pass-through entities were 4.5% of total state and local business taxes in FY2007.

  The study speculates that, based on past trends, the current decline in property values may result in a shift of the property tax burden to business taxpayers. Local business taxes grew faster than state-level business taxes during FY2007, primarily because of the growth rate of the local business property tax. Contributing to a slowing growth of business sales tax in FY2007 was declining growth in capital investment. Rising corporate profits created significant growth in corporate income tax revenue over the last five years. However, in the third quarter of 2007 year-over-year corporate income tax collections declined for the first time since the year following the last recession.

  Subscribers to CCH Tax Research NetWork can view the study.

Total State and Local Business Taxes, Ernst & Young LLP and the Council On State Taxation, April 2008.