The Shape of Tax to Come

A Tax & Estate Planning blog for 21st-century Texans

33 States Have Raised Taxes

The Center of Budget and Policy Priorities has released a new study titled “State Tax Changes in Response to the Recession.” As a result of the recession, state tax revenues have dropped $87 billion, or 11% overall. In an effort to recoup these losses, states have been raising taxes.

To recoup lost revenue, states have taken such actions as eliminating tax exemptions, broadening tax bases, and in some cases increasing rates as well as raising a number of fees. Doing so is part of an established pattern; states historically have turned to revenue increases as part of the response to recessions. They have found that raising new revenue provides more short-term economic benefit than relying only on spending cuts and does not have an adverse impact on longer-term economic performance.

The result of these tax increases has not been to offset all of the losses, but only to make up a fraction of the lost tax revenue.

In 33 states, tax changes are increasing annual revenues, relative to what the state otherwise would have collected, by $31.7 billion. Even after accounting for a few states that lowered taxes, net tax changes for 2008-2009 total $29.7 billion in expected revenues, or 3.8 percent of total state revenues. The difference between the fall-off in revenues and the limited impact of the tax actions enacted is shown in Figure 1.

Figure 1

Map of State Tax Increases

Read the full story, which includes a breakdown of the different types of taxes raised, here.

March 9, 2010 Posted by | Uncategorized | | Leave a comment

   

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