Businesses paid $497 billion in state and local taxes for the 2005 fiscal year, about 44 percent of the total taxes collected by all state and local governments, according to the annual study prepared by the Quantitative Economics and Statistics practice of Ernst & Young in conjunction with the Council On State Taxation.

The study includes estimates of taxes paid by major industry groups. The share of taxes paid is determined by a state's overall tax system.

QUEST practice national director Thomas Neubig said corporate income and payroll taxes have increased sharply since 2002 -- coinciding with the rebound in the economy - and that property taxes and sales tax on businesses still account for 60 percent of state and local business taxes.

Key findings of the study include:

  • Over the last four years, state and local taxes on businesses rose faster than total state and local taxes. Businesses paid 48 percent of the increase in state and local taxes from 2002 to 2005.
  • Property taxes on business property were nearly $183 billion in 2005, accounting for 37 percent of total state and local business taxes.
  • Corporate income tax represents only 8 percent of total state and local business taxes nationally, but has risen 44 percent since 2002.
  • The composition of total state and local business taxes paid varies by industry, with manufacturing and transportation continuing to face significant property and sales taxes on business property.

COST president and executive director Douglas L. Lindholm said the hope is that the study can provide policymakers and the public with a factual basis to evaluate the current state and local business tax burden. A copy of the full study is available at www.ey.com/us/quest.

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