ALBANYThe effective state and local tax rate on businesses in New
York is among the highest in the country, a study by the nonpartisan Council
on State Taxation finds.
State and local business taxes in New York totaled an estimated $42 billion
in 2004, according to the study. That represented 5.7 percent of New York's
gross state product (GSP), or overall economic activity, while business
taxes nationwide averaged 4.7 percent of gross product.
Only 12 states' business taxes took a bigger bite from economic activity — Alaska, Louisiana, Maine, Mississippi, New Mexico, North Dakota, Texas, West Virginia, and Wyoming. Most of those states derive a substantial portion of their business taxes from the extraction of coal, gas and oil — and thus are able, in effect, to export much of that tax burden to consumers in other states.
The study included estimates of businesses property taxes, sales and
excise taxes, gross receipt taxes, corporate income taxes, and payroll
taxes. New York taxes were in the top five for all of those measures,
ranking second-highest in property taxes, fifth-highest in gross receipt
taxes, second-highest in corporate income taxes, and third-highest in
payroll taxes.
Another recent study, by the Federal Reserve Bank of Boston, confirms
that New York's taxes are by far the highest in the country. The "tax
effort" required of New York's workers and businesses is 43 percent
higher than the national average, according to the Federal Reserve study.
That level is far above any other state; even the state with the second-highest
tax effort, Connecticut, was only 19 percent above average, the Fed's
study showed.
Tax effort measures how much state and local governments in each state
collect in taxes, compared to the revenue-generating capacity of the state's
economy. Federal Reserve economists also calculated "fiscal need"
in each state. That index includes measures such as the poverty rate,
the proportion of residents who are school-aged, and number of vehicle-miles
traveled.
The effective state and local tax rate data, provided by the Council on State Taxation, has been added to the Institute's compendium of key economic and social indicators, Just the Facts. The online report includes 32 other tables comparing the cost of major business expenses, along with other indicators, in New York and the other 49 states.
The business tax table can be found at www.ppinys.org/reports/jtf2004/effectbusitax.htm. All 32 tables in the Just the Facts report are available at www.ppinys.org/reports/jtf.htm.