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?
That’s what legislatures seem to be trying to find out these days.
Wisconsin has enacted a $1.77 per pack cigarette tax (raising the tax an extra dollar per pack) that goes into effect in January 2008. Believe it or not, that will not make Wisconsin the most expensive state to light up.
The current average in the US per pack is 80 cents, largely due to low rates in southern states.
Curious as to where your state stands? Here are the 2007 rates per pack by state (this is addition to the existing federal cigarette tax of 39 cents per pack, and local cigarette taxes):
1, New Jersey 2.57
2, Rhode Island 2.46
3, Washington 2.025
4, Arizona 2.00
4, Maine 2.00
4, Michigan 2.00
7, Alaska 1.80
8, Vermont 1.79
9, Montana 1.70
10, Hawaii 1.60
11, Connecticut 1.51
11, Massachusetts 1.51
13, New York 1.50
14, Texas 1.41
15, Pennsylvania 1.35
16, Ohio 1.25
17, Minnesota 1.23
18, Oregon 1.18
19, Oklahoma 1.03
20, Tennessee 1.00
20, Maryland 1.00
20, District of Columbia 1.00
22, Illinois .98
23, New Mexico .91
24, California .87
25, Colorado .84
26, Nevada .80
26, New Hampshire .80
28, Kansas .79
29, Wisconsin .77
30, Utah .695
31, Nebraska .64
32, Wyoming .60
33, Arkansas .59
34, Idaho .57
35, Indiana .555
36, Delaware .55
36, West Virginia .55
38, South Dakota .53
39, North Dakota .44
40, Alabama .425
41, Georgia .37
42, Iowa .36
42, Louisiana .36
44, North Carolina .35
45, Florida .339
46, Kentucky .30
46, Virginia .30
48, Tennessee .20
49, Mississippi .18
50, Missouri .17
51, South Carolina .07 (NOT a typo)
The U.S. Department of Health and Human Services has estimated that each 10% bump in cigarette tax would result in a 3-5% decrease in cigarette consumption.
So, just for fun, I thought I’d try a little experiment – understanding that the stats will be skewed. If you’re so inclined, leave behind your state (or country if not a US resident) and whether or not you smoke in the comments… Thanks.
digg_url = ‘http://digg.com/health/So_exactly_how_much_do_you_want_to_smoke’;
Not right now. But there’s a chance that you might in the future: the moratorium on an internet tax expires November 1. The moratorium is sometimes referred to as the Internet Tax Freedom Act, or ITFA.
ITFA has been extended twice since 1998. It bans taxes on certain internet transactions at the federal level, but also prohibits state and local governments from passing similar taxes with the exception of nine states which were allowed to keep existing internet taxes. The internet transactions are: internet access (including dial-up, DSL, cable modem and wi-fi); “double tax” for products or services bought over the internet; and discriminatory taxes that treat internet purchases differently from other types of sales. Those nine states which are current exempt from the ban are Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas, Washington and Wisconsin; not surprisingly, most of the governors of these states appear to oppose making the ban permanent since the exemptions will not be included in a permanent bill.
Nonetheless, a handful of Senators, including John McCain (R-AZ), Trent Lott (R-MS) and John Sununu (R-NH) have suggested a permanent internet tax ban. Not surprisingly, fearing both loss of revenue and potential for abuse, there is opposition to a permanent ban on both sides of the political spectrum who have offered a number of alternatives. One suggestion is to limit the length of the moratorium rather than make the ban permanent – but so far, that isn’t getting much support.
What do you think? You pay tax on your phone connections, why not the internet? That is the loudest argument, after all, against the permanent repeal – the fact that cell phone service is taxed and is at an all time high. So, the thinking goes, how bad can it be? Well?
digg_url = ‘http://www.digg.com/tech_news/Do_You_Owe_Uncle_Sam_for_Reading_This’;
Our first presidential candidate to be featured in our series of interviews is Tommy Thompson, a Republican and former Governor of Wisconsin.
Here are his unedited answers to my six questions:
1. What’s the single most important tax issue facing Americans today?
The growing threat of the AMT to the middle class is the most important tax issue facing Americans. The unintended consequence of Congress trying to make sure the rich “pay their fair share” is seriously threatening middle class families.
2. If you could only make one “quick fix” in terms of an extra credit, a disallowed deduction, whatever – what would it be?
Repeal the AMT.
3. Which is a more egregious tax on the American public: the AMT or the federal estate tax?
AMT
4. It has been suggested that the IRS should be eliminated. Do you believe that this makes sense, and if you do, what would you establish in its place?
An IRS at some level or another is of course necessary. With a flat tax, however, the need for a large IRS would be greatly diminished.
5. Do you think that significant tax cuts are possible considering the current state of the economy, specifically the escalating cost of the war in Iraq?
It’s necessary to shift to a flat tax of 17 percent to increase productivity and spur growth. It also is necessary to repeal the AMT or roll it back so it does not hurt the middle class. Both of these changes would have the effect of reducing the level of taxes paid by Americans, but it would also see additional revenues generated from economic growth and better compliance.
6. And just for fun, if Uncle Sam handed you a huge refund check right now, what would you do with it?
Buy more Green Bay Packer season tickets.
–
Thanks, Governor!
For more information on Governor Thompson’s policies, visit his website.
