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State Tax Increases
In recent years, most states increased taxes to increase spending even during economic downturns. This report compiles a list of tax increases by state from FY2003-FY2012. The list is based on data from the National Association of State Budget Officers (NASBO) with three adjustments. First, we compounded the tax increases to reflect tax hikes adopted since FY2003 which have to be paid in successive years. Second, we adjusted each state’s tax increase by population to produce a better comparison across states. Third, the taxes for each year are indexed so all tax increases are stated in terms of 2012 dollars.
The index shows that this year, as in previous years, New Jersey is the leader among all states in terms of tax increases. Since FY2003 the Garden State increased taxes per resident by $5,721.82 for a total net tax increase of over $49.9 billion. Connecticut, Rhode Island, New York, Nevada, Delaware, Tennessee and Minnesota also suffered per capita tax increases of over $2,000 in the same period.
From 2003-2012 only nine states reduced their taxes. This group is led by Idaho, North Dakota and Florida, all of which reduced their taxes by over $350 per capita.
North Dakota, as in 2011, leads the states in reducing taxes. Since 2003, North Dakota has reduced taxes $428.85 per capita. Over that period, this is a net tax cut for North Dakotans of $280 million. This year, all nine states that reduced their taxes over the FY 2003-2012 period also reduced their taxes in 2012.
For the first time since 2008, net taxes decreased across the states in FY2012. In total, states experienced a $596 million tax cut, less than last year’s tax increases of $6.4 billion. However, many states are still attempting to squeeze their taxpayers to fund excessive spending.
For example, the Maryland House of Delegates passed the Budget Reconciliation and Financing Act (BRFA) in May 2012. The act results in a $300 million tax increase on Marylanders. The BRFA extends the Maryland “Millionaire Tax” to single filers making over $100,000 and joint filers making over $150,000.11 This tax hike alone will force Marylanders to work an additional 7 hours for COGD next year.
More popular than ever with politicians are “sin taxes,” or excise taxes on certain products that policymakers can target under the guise of social welfare efforts. The most constant targets are normally tobacco and sprits or wine, but recently sugar and soda have gained the ire of revenue-hungry lawmakers as well.
Maryland’s budget also included two tax increases on tobacco. The tax on smokeless tobacco will rise from 15 percent to 30 percent and the tax on “little cigars” will leap from 15 percent to 70 percent of wholesale.
Similarly, in Illinois, Governor Pat Quinn recently signed into law a $1-a-pack cigarette tax increase to bankroll the state’s unstable Medicaid program. In addition to the increase in the cigarette tax, the legislation also doubles the taxes on other types of tobacco.
Estimates show that corporate tax, personal income tax and sales tax make up 80 percent of state tax revenue. In 2012, thirteen states cut their corporate income taxes, constituting the large change in revenue measures from the previous year; these efforts resulted in a $1.3 billion net corporate income tax cut. However, personal income taxes are on the rise, with $571 million in increased taxes on personal income going into effect in 2012. Finally, while sales taxes decreased by $690.5 million, targeted excise taxes on alcohol and cigarettes increased by $97.1 million and $58.1 million respectively.
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- About the Author/The Thomas Jefferson Fellowship
- A Message from Grover Norquist and COGC Executive Director Mattie Duppler
- Overview of Results
- Cost of Government Day Components
- State by State Breakdown
- The Government Spending Burden
- State Tax Increases
- Government Employees
- The Regulatory Burden
- Interstate Migration
- The Debt Ceiling and Budget Control Act of 2011
- The Corporate Income Tax in the United States
- Abundance of Supply: America's Energy Resources