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February 27, 2007

Business taxes in New York higher than those in most competing states, study finds

Businesses in New York paid an estimated $50.5 billion in combined state and local taxes, or 43 percent of all taxes, in fiscal 2006, a national study finds.

That tax burden represented 5.9 percent of overall economic activity, or gross state product -- a share that was significantly higher than the cost of business taxes in most large, industrialized states and more than 15 percent above the national average.

The 50-state study was conducted by tax experts at Ernst & Young for the Council on State Taxation, a nonprofit association based in Washington.

Businesses in New York paid $20 billion in property taxes, $11.3 billion in sales taxes and $7.1 billion in corporate-income taxes in 2006, the Ernst & Young researchers estimated. Another $12 billion came from taxes on personal income earned by owners of S corporations, partnerships and other "pass-through" entities; excise and gross-receipts taxes, unemployment insurance and other taxes.

Total state and local business-tax collections in New York rose by $29 billion, or 33 percent, from 2002 to 2006, the study found.

New York's overall effective business-tax rate of 5.9 percent compared to effective tax rates of 4.8 percent in New Jersey, 4.7 percent in Michigan and Ohio, 4.4 percent in Massachusetts, and 3.9 percent in Connecticut and North Carolina. Most states with overall effective tax rates higher than New York's collected significant taxes on oil, natural gas or minerals, which the Ernst & Young study described as "severance taxes that are not taxes on mobile capital."

Nationwide, businesses paid $554 billion in state and local taxes in 2006, the report found.