NEWS

Business tax burden rising in the state; Survey shows 45 percent jump in past five years

Jon Chesto

The combined state and local taxes paid by Massachusetts businesses rose by 45 percent during the past five years, according to a new Associated Industries of Massachusetts Foundation report.

The employer group released the report, prepared by the Boston office of Ernst & Young, on Monday on the eve of a debate about the future of corporate taxes in the state.

A panel of appointees from legislative leaders and Gov. Deval Patrick was slated to meet today to discuss and recommend state taxation changes, including a proposal to change the way multistate companies pick where they report their income. Business groups argue that any shift in geographic taxation should not increase the overall corporate tax burden.

Eileen McAnneny, vice president of government affairs at AIM and a tax panel member, is among those who say any tax changes should be revenue-neutral.

She said the AIM report provides further proof that companies pay a variety of state and local taxes beyond the 9.5 percent corporate income tax. Property taxes represented the biggest chunk of businesses’ state-and-local tax burden in the 2007 fiscal year - 40 percent - followed by corporate income taxes (15 percent), unemployment insurance taxes (13 percent) and sales taxes (12 percent).

‘‘This highlights the fact that businesses pay much broader taxes than anything the commission is focused on,’’ said Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation and a tax panel member.

The report shows companies paid $13.5 billion in state and local taxes in the 2007 fiscal year, up 45 percent from 2002. That compares with a 33 percent growth rate for non-business taxes imposed by the state and local municipalities.

One main reason for the increase is the state’s gradual recovery from a recession: Companies, in general, were reporting much higher profit levels in 2007 than in 2002.

But policy changes also played a role. Widmer said that state government increased annual business taxes by about $375 million with three rounds of what state officials called ‘‘loophole closings’’ over that time period. The AIM report also cited changes to unemployment insurance rates.

‘‘What some people call closing ‘corporate loopholes,’ we say they are tax increases,’’ McAnneny said.

Jon Chesto may be reached at jchesto@ledger.com.

Patriot Ledger