With budget deadlines looming, many states felt that there were no alternatives to balancing the budget other than raising taxes or adding new ones. More than half of all states were considering significant tax changes to fill gaping holes… What a difference a few weeks and some angry taxpayers make.
New Jersey recently “found” more money than it had hoped for after setting up an amnesty program. Other states are filling holes by trimming budgets.
Consider Pennsylvania. Governor Ed Rendell had indicated that a 10% increase in income tax would be necessary to head off a budget crisis. It was all but settled until yesterday when a Democratic budget proposal yanked $1.3 billion in funding for some colleges and student-loan program. The result is a $29.1 billion budget offered by Rep. Dwight Evans (D – Phila), chairman of the Appropriations Committee. And Governor Rendell may be on board. Republicans oppose the plan, offering their own version of a bill which makes deeper spending cuts but reportedly lacks about $1 billion of needed revenue. Nonetheless, both parties have agreed that a tax increase isn’t necessarily the answer.
And despite concerns that talks of a tax increase may resurface next year, Illinois managed to pass a budget this week that results in no additional tax. Governor Pat Quinn had indicated that a 50% tax increase would be necessary to keep the state going but this week, the Senate and House voted overwhelmingly to borrow funds and delay other spending. The result is a budget that, for now, keeps Illinois out of a deficit and allows taxpayers a reprieve in tax increases.
Does this mean that tax increases are off the table? Not at all. But it is proof that legislators are listening to taxpayers – the answer doesn’t always have to be “raise taxes.” Other states – from North Carolina to Oregon to California – should take notice.
With revenues plummeting and federal aid in short supply, many states are scrambling to fill holes in their budgets. The easiest way to do it? Raise taxes.
At least ten states are considering major increases in the near future. They are:
- Arizona
- Connecticut
- Delaware
- Illinois
- Massachusetts
- Minnesota
- New Jersey
- Oregon
- Washington
- Wisconsin
Two states have already implemented significant increases: California and New York.
That means that at about a quarter of all states are raising taxes to meet budget shortfalls. If you take those that don’t have income taxes out of the equation, it’s closer to a third. The bad news is that number is expected to climb.
Adding to the income tax woes are shortages in sales tax revenue. Sales tax revenues are at their lowest in years, fueled by a general decline in the sales of taxable goods across the country. Some experts worry that increasing income taxes will only contribute to the drop in sales tax, creating even more problems.
It will be interesting to see what states follow… The number of federal mandates (like No Child Left Behind) has not decreased while funding for those programs has. Add that to increasing jobless claims and foreclosures (and those related costs) and many states will have bigger problems, not fewer. Is your state next?
Illinois residents have been willing to deal with some pretty steep tax increases. But Gov. Pat Quinn may have gone too far this time: Quinn wants to tax coffee and sweetened tea products in grocery stores in the same manner as soft drinks.
Gov Quinn has also suggested raising taxes and fees on driver’s licenses (double to $20), license plates ($20 increase), hunting and fishing licenses, cigarettes ($1 increase) and tickets to the State Fair (horrors!). He also wants to extend the state’s sales tax to some shampoo and personal hygiene products.
Chicago, the largest city in Illinois, already has one of the most expensive tax structures in the country, with a sales tax of more than 10%. The newest proposals from the Governor – as well as those already in place in Cook County – are already drawing complaints. And the complaints don’t stop at the city line – residents all over the state have been protesting what they consider “nickel and dime” reactions to a massive budget crunch.
Proponents of the various tax and fee increases argue that they have no real alternatives. Without additional increases on fees and sales taxes, they claim that property taxes will face another increase – or worse (we all know what that means: income taxes!).
Ugh. I know that states and municipalities are suffering in this economy. And I know that taxation feels like the fastest, easiest way to increase revenue. My own great city of Philadelphia has been talking up property and sales tax increases, too, to attack a massive deficit. But taxing coffee? Even bottled, that’s just heresy!
My mother always told me that you are judged by the company that you keep. If that’s true, Governor (for now) Rod Blagojevich of Illinois should likely beef up his already impressive defense counsel.
Christopher Kelly, a fundraiser for the now infamous Governor, has decided to change his plea in a federal tax fraud case related to his personal and business taxes. Kelly previously entered a “not guilty” plea but has indicated that he will now plead guilty to 12 counts of tax fraud at his January 16 hearing.
Nobody’s saying it but you and I are both thinking it so I’ll just put it out there: might this plea be related to a deal that Kelly struck with the feds to testify against Blagojevich? Just saying.
