US States Ask For $17 Billion In Tax Hikes To Plug Widening Deficits

by Mike Godfrey, Tax-News.com, Washington

30 June 2003

As the end of the fiscal year approaches for 46 US states, around nine legislatures remain deadlocked on budgetary issues as lawmakers attempt to force through record levels of tax hikes and spending cuts to pay for runaway budget deficits.

According to a report compiled by the National Governors Association (NGA), using data provided by the National Association of State Budget Officers (NASBO), Governors in 29 states recommended tax and fee increases in fiscal 2004, resulting in a net increase of $17.5 billion - the largest since 1979. Furthermore, state spending growth was cut to only 0.3% in fiscal 2003 and spending is expected to decline 0.1% in fiscal 2004.

The revenue increase data for fiscal year 2003 indicates that:

• 15 states proposed sales tax changes, for a net increase of $6.2 billion - with California accounting for $4.4 billion of the net amount.
• 10 states will modify their personal income taxes, totaling $5 billion.
• 11 states will adjust corporate income taxes, totaling $759 million by closing loopholes and eliminating credits.
• 14 states raised so-called "sin taxes" on cigarettes, tobacco and alcohol. Alaska and Michigan will increase motor fuel taxes.
• 17 states chose other methods, such as gaming taxes, nursing home surcharges, and hotel occupancy taxes, while 19 states will increase various fees.

Ray Scheppach, executive director of the governors' group last year stated that the states' fiscal situation was the bleakest since World War Two. He has now revised that to the war of 1812. "Unfortunately, the news is pretty bad," said Scheppach - clearly a master of understatement - adding "and I think it's going to get a little worse. It's clearly the worst since we've been keeping statistics."

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