Question of the Month -March 2004
What is the role played by state and
local business taxes in the SLC state economies?
A number of state
legislatures continue to grapple with the following question: “Are businesses
paying their fair share of our state’s taxes?” A recent study released by the
Council on State Taxation provides a detailed state-by-state analysis of total
state and local business taxes. According to this study, businesses paid over
$400 billion in total state and local taxes in FY 2003, 43 percent of total
taxes collected by all state and local governments across the country. In
addition, businesses have paid 65 percent of the entire increase in state and
local taxes from FY 2000 to FY 2003. The following table presents the national
rankings for the 16 SLC states in four different categories.
State Rankings of
Measures of Business Taxes, FY 2003
 | Business Share of All
Taxes: States that rely heavily on individual income taxes will tend to have
lower business tax shares, and vice versa. |
| Business Taxes per
Employee: The average tax cost per private-sector employee is often used to
evaluate the relative tax competitiveness of business taxes across states. |
| Business Taxes as a
Percent of Private Sector Economic Activity: This includes the income earned
by both labor and capital employed in the state, another measure of a state’s
tax competitiveness. |
| Business Taxes as a
Percent of Capital Income: Represents the return to capital (plant, equipment,
land, inventory, working capital, and other capital) used in a state.
|
