EY-COST Study: State and Local Government Tax Revenue Increases Despite Pandemic
Tuesday, November 16th, 2021
Ernst & Young LLP (EY US) announced today that according to its study prepared for the Council On State Taxation (COST) and its affiliate, the State Tax Research Institute (STRI), businesses paid more than $839 billion in state and local taxes in fiscal year 2020, an increase of 0.5% from fiscal year 2019. State business taxes decreased by 1.9%, and local business taxes grew by 3.1%. The report, titled "Total State and Local Business Taxes: State-by-State Estimates for Fiscal Year 2020," also shows that in 2020, business tax revenue accounted for 44.3% of all state and local tax revenue.
The study provides estimates of state and local business taxes that reflect tax collections from July 2019 through June 2020 covering a period with the final quarter reflecting the economic effects of COVID-19 lockdowns beginning in mid-March. The data presented in this study is for each state's fiscal year, which differs by state.
"The pandemic wreaked havoc on America's households and just about every aspect of private and public sector business operations, which created an historic disruption in the state and local government's ability to collect taxes," said COST President and Executive Director, Douglas Lindholm. "However, state and local governments reported a slight increase in tax revenue, a number we may see go up when the final numbers are tallied in next year's report."
"COVID-19 lockdowns triggered widespread tax filing extensions," said Andrew Phillips, Principal with Ernst & Young LLP's Quantitative Economics and Statistics (QUEST) practice. "In fact, 43 states shifted the payments of either personal, corporate or general sales taxes to 2021. We expect that a large portion of this lost revenue will be recouped by states when delayed filing payments are collected."
Other key findings of the study include the following:
Property taxes totaled $329.2 billion and remain the largest state and local tax paid by businesses. Property taxes accounted for 39.2% of total state and local business taxes and 76.5% of local business taxes.
General sales taxes on business inputs and capital investments totaled $180.1 billion, or 21.5% of state and local business taxes.
State and local corporate income taxes totaled $71.7 billion, or 8.5% of all state and local business taxes.
Individual income taxes on business income totaled $50.4 billion, or 6% of total state and local business taxes.