It’s not just NJ facing higher taxes these days. Nearly 20 other states are considering raising or adding more taxes and fees to close gaping holes in state budgets.
There are a number of reasons for increased deficits at the state level. Among them are flat revenues as the economy overall takes a dive; reduced federal funding for programs that the government requires states to maintain (No Child Left Behind, Medicaid and terrorism protection are often mentioned); increased costs for the unemployed and rising pension and health care costs for state workers. Taken as a whole, it’s far too much for many states which are seeing record deficits.
What’s a state to do? Many claim that there is no choice but to raise or add taxes.
Recent additions to the “raising the tax” bandwagon include Maine, North Carolina, and my own state of Pennsylvania.
Pennsylvania Governor Ed Rendell has introduced a controversial increase to be implemented across the board. The 10% increase would raise the personal income tax rate to 3.37% (Pennsylvania has only one rate and it is not dependent upon income level). Republicans in the state Senate are crying foul but Gov. Rendell believes the cuts are necessary and unavoidable. As proposed, the measure would raise the rates only temporarily to 2012.
In North Carolina, a recent measure to raise “sin taxes” on cigarettes and alcohol was killed off in the legislature. Opponents argued that these taxes disproportionately affected the poor (I’m sure it didn’t have a thing to do with North Carolina being a *big* tobacco state). A measure which has survived would raise income taxes on top income earners only: currently, the increase is targeted at those making $200,000 or more per year. Without the increase, lawmakers say there is no money in the budget to fund education or Medicaid programs.
Maine, however, is taking the opposite position when it comes to income taxes. Earlier this month, state lawmakers gave Gov. John Baldacci a win after what’s being described as a “massive overhaul” in the state tax system. The measure would actually lower the top income tax rate in the state from 8.5% to 6.5%.
To make up for the loss in revenue – and to pull in additional revenue – the state is broadening its taxation of goods and services. Also set to go up? The state’s meals and lodging tax, which I believe was just increased in 2007, would jump to 8.5% and taxes on rental cars would climb to 15%. Ironically, the revenue from those bumps is earmarked for tourism promotion.
More state budgets will be “finalized” (if you can call it that) as summer draws closer. Keep watching for updates.
Interestingly enough, my state (Arkansas) is CUTTING taxes this year: the sales tax on groceries and prescription drugs is being reduced from 3% to 2%. So far as I can tell, no significant tax increases are in the works.
Of course, the State also has cut or frozen funding in many areas. I’m in the State University system, and no one is getting raises this year. At one point faculty were told they might have to take a pay cut of up to 2%, but apparently the administration at my campus has found ways to avoid even that.
Give me a line item budget of those states and I can guarantee you that in less than an hour I could find enough areas to cut to balance their budgets. It’s not that it can’t be done, it’s that no one has the political will to do it. Since we are at a point where the majority of citizens pay very little in taxes, politicians fear that this constituency group would end their political careers. The system so heavily favors the bottom 50 percent of earners that the political will to control spending is evaporating. How many times have we heard from people something like, ” In a country as rich as the USA, how can we not have free health care for all, or free this, or free that?” Just ask the enormously obese women with a food stamp card at the supermarket and she will tell you that it should be a right!; for this or that.
At some point in the near future the ignorant masses will watch the “richest country in the world” go bankrupt trying to fill their every need. With $60 trillion of unfunded liabilities already on the federal books (if you don’t believe me check out I.O.U.S.A. on dvd) we might already be bankrupt and not even know it yet.
Oh that plan in Maine is terrific. Tax the broad middle class more, and then directly take the money and give it back to the rich. After all, that worked well federally in the last eight years.
But, what happens when the rich have all the wealth and the middle class has none? Will the rich volunteer to serve food in the soup lines? That remains to be seen…