The New Economy

Coming to 25 states: higher taxes

And more states may follow, as officials try to balance budgets in the midst of an economic slump.

By Mark Trumbull  |  Staff writer/ July 1, 2009 edition

Matt York/AP

Arizona Gov. Jan Brewer (R), shown here at a meeting of the National Rifle Association in May, is currently wrangling over budget matters with a Republican-controlled legislature. Lawmakers don't support her proposal for a rise in the state sales tax. She says the Legislature's budget "incorporates devastating cuts."


More than half of US states are responding to budget challenges with an answer that’s often unpopular with their residents: tax hikes.

In some cases, the levies are modest. Still, six states are increasing personal income taxes, 11 are raising sales taxes, and eight are boosting rates paid by businesses.

The wide geographic scope of the tax increases is an indicator of how much pressure an economic slump has put on state finances. And many of the states are ones that avoided significant tax boosts earlier this decade, the last time the United States was in recession. These include Florida, Minnesota, Wisconsin, Colorado, and Idaho.

In all, 25 states have moved to raise taxes so far this year. Another 12 are considering such moves as they launch into a new budget year this week, according to the Center for Budget and Policy Priorities, a Washington research group that has tracked all the measures.

Given the weak state of the economy, the tally may continue to rise as the year goes on, budget analysts say. That’s the case even though states are also cutting spending – at a 4.6 percent pace last year, which was faster than at any time since 1983. States are also getting a big inflow of federal aid from the economic stimulus plan passed earlier this year.

Often, the tax proposals are politically rancorous.

On Wednesday, Arizona’s Republican Gov. Jan Brewer was still wrangling over budget matters with a Republican-controlled legislature. Lawmakers don’t support her proposal for a rise in the state sales tax, but in a statement Wednesday, she said the Legislature’s budget “incorporates devastating cuts to education, public safety, and our state’s most vital health services.” Governor Brewer sought to resolve some of her concerns by using her power of line-item veto, but further sparring with legislative leaders lies ahead.

The tax wrangling comes at a time of sharpening debate about America’s fiscal health. Federal government debt is rising fast. Many conservatives say the budget pressures provide an opportunity for the public to stand firm for spending restraint – or to simplify the tax structure toward a “flat tax” model. Liberals are more likely to support a mix of tax hikes and spending cuts – and to favor steepening tax rates on high-income households.

New York recently moved to raise income taxes on incomes above $200,000, while Hawaii did so on incomes above $300,000.

Overall, states’ general-fund spending has risen on average by about 1.9 percent a year since 1979, after adjusting for inflation. That pace, tracked by the National Governors Association, has been faster than population growth (about 1 percent a year) but not as fast as the growth of the economy (about 2.6 percent a year).

Many of the new tax moves are relatively small, such as expanding the services included in a sales tax. Ten states have boosted alcohol or tobacco levies. Nine are raising more money from gas taxes or fees tied to automobile ownership. Fees are also going up for people who use motels in Hawaii, hunt in Maine, or gamble in South Dakota.

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Comments

1. Tim Elston | 07.02.09

I wonder why stories like this rarely present the full list of affected entities - in this case, states.

2. M Sheaffer | 07.02.09

Just once, I would like to hear or read a state is becoming more frugal. Spend less versus tax more. Gutless politicians.

3. bill | 07.02.09

Is there anyone out there with a functioning brain who doesn’t realize this is all on purpose? Not one thing that Colonel Obama has done is designed to help the economy recover, not one thing.

Colonel Obama needs as much misery as possible to get people to turn to the false hope of government.

4. barry8 | 07.02.09

Our problem in Texas is that our sales tax on gasoline is being placed into our general fund instead of our road fund where it is suppose to go. Our governor is trying to have toll roads build instead of using our money for that purpose. Our politicians are crooked as snakes. I don’t trust any of them.

5. greg | 07.02.09

We are all witnesses to a historical period, when an economic dynamo military superpower, insulated by two oceans is in the latter stages of being setup through legislative means to fall to the level of the other anemic economies of the international community. Normal Americans see the logical disconnect between lip service paid to restoration, while legislative action
is taken to undermine the individual citizen’s inspiration to pursue life , liberty and happiness thereby killing the engine of the secret to this country’s success. Journalists today are little more than groupies chasing their favorite rockstar politician drooling over each prevarication falling from their campaigning lips.

6. Peter A. Quilici | 07.03.09

The one thing you won’t hear about states doing is trying to force their unionized workers to accept more modest salaries and modify their gold plated pension and health plans. Sadly, too much money paid to government workers makes its way back to polticians, so one of the major state budget excesses will not be addressed.

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