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?
Massachusetts has always been a little – we’ll call it different – when it comes to politics. And in some cases, it’s paid off. It’s true that you can drive through the state without being assaulted by billboard after billboard. And the state is, relatively speaking, free of litter and there’s very little in the way of sprawl. Compared to its neighboring states, Massachusetts is downright environmentally friendly. It may be about to go even greener… but going green has a price.
Massachusetts Governor Devan Patrick is considering a so called “Hummer Tax” for residents of the Commonwealth. The tax would mean that those who drive more fuel efficient vehicles would pay less in taxes, clearly providing an incentive to favor those vehicles over larger SUVs. If the controversial measure passes, it would be the first such tax in the nation.
Opponents of the bill say that it is an unfair penalty for a lifestyle choice: driving a bigger car. Proponents of the bill say that the choice is yours to make, but you need to pay for it.
Governor Patrick has also proposed a new gas tax, which would be a 19 cent bump. The tax, in conjunction with the revenue from the “Hummer Tax” would allow the state to overhaul their current transportation system, which proponent claim is in need of a $19 million facelift.
There’s no word yet on whether the bill has public support in the Commonwealth. Vocal opposition has so far only come from – not surprisingly – those who sell large SUVs. But then, the bill is still in the early stages.
Would you be in support of such a bill in your home state?
It was a historic day on yesterday with the election of President Elect Barack Obama. It’s almost easy to forget that there were other elections and ballot issues to consider but voters in some states faced a laundry list of issues. Among those were several state tax measures, including:
In Arkansas: Voters supported an amendment to the Arkansas Constitution which, among things, eliminated a reference to the poll tax.
In Colorado: Voters said no on several tax measures, including a state sales tax increase. Amendment 58, which would end a property tax credit for Colorado’s oil and gas industry and boost severance tax revenue by $321 million a year – seven companies, including Chevron and Conoco each contributed $1 million towards the opposition campaign. Severance taxes are imposed on minerals extracted from the state, or “severed,” to compensate for nonrenewable resources.
In Florida: Voters defeated Amendment 8, which would have authorized counties to ask voters if they want to increase the sales tax for up to five years to aid the local community college. Voters approved Amendment 4, which would give conserved property a lower tax assessment; the amendment also eliminates property taxes on lands placed in a perpetual conservation easement.
In Louisiana: Voters said no to a bill that would dedicate additional state severance taxes to parishes (like counties) of origin (See Colorado above).
In Maine: Voters approved a measure vetoing a new tax on beer, wine and soft drinks, which would help finance a state health care program.
In Massachusetts: Voters rejected another measure that would have cut, and then eliminated, the state’s personal income tax. A similar measure was rejected in 2002.
In North Dakota: Voters rejected an income tax cut. Measure 2 would have cut income taxes in half and corporate income taxes by 15%.
In Nevada: Voters shot down an attempt by the Nevada Legislature to amend or repeal the sales and use tax without voter approval.
In Oklahoma: Voters overwhelmingly approved an exemption from personal property tax for injured veterans and veterans’ surviving spouses. Voters also approved a measure that would require a person or business to file an application in order to receive a property tax exemption.
In Oregon: Voters said yes to an exemption that required 50% voter turnout to pass property tax increase measures. Voters turned down a measure that would have allowed federal taxes paid to be deducted from Oregon taxable income.
(Note: Findings were based on local newspaper and media reports. If you have additional information, please share!)
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Massachusetts’ Economic Assistance Coordinating Council is expected to give its approval to a $3.5 million tax break for JPMorgan Chase & Co. voted in by the Boston Redevelopment Authority (BRA) and City Council. The tax break includes a $2 million cut in property taxes and a $1.5 million break on state income tax.
It’s a good day to be JPMorgan Chase.
Proponents of the tax break claim that it’s a good thing for Boston, as well, since it will keep the company and its employees in Beantown. “The JPMorgans of the world have other options,” said BRA director John Palmieri.
Tax incentive breaks were originally intended for businesses building in blighted areas that needed a boost. However, companies like JPMorgan Chase are taking advantage of these programs to avoid taxation. In a tough economy, critics question why prosperous companies need a tax break to relocate to thriving urban centers.
As a resident of such as “thriving urban center” (Philadelphia), I concur. A few years ago, Philadelphia was host to a similar argument when the Cira Centre was built in a special zone that allowed for tax breaks – despite being literally minutes from a booming downtown Philadelphia and its universities – it wasn’t as if law firms like Dechert and Woodcock Washburn were being given an incentive to move to Kensington. The break allowed partners at Dechert to receive tax breaks, including not having to pay the city’s business privilege tax. The idea, as in Boston, was to encourage extending companies to locate into an area designated as blighted, thus expanding the city’s business district. The problem? The area wasn’t blighted. The bigger problem? Dechert’s law partners got the break as part of the negotiations – but associates and support staff didn’t get the same deal; they continue to pay the wage tax.
I’m all for urban revitalization – heck, I live in the City. I want to see it vital.
But massive tax breaks for companies to encourage them to “stay” in the City? Guess who’s funding those breaks? Yeah, you got it.
