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March 25, 2010

Overwhelming Budget Gaps Lead Many States to Raises Taxes and Fees

The National Conference of State Legislatures lays out actions state legislatures took during the 2009 legislative sessions.

Facing the toughest budget situation in generations, states were forced to raise taxes and fees to plug budget holes. Everything from personal income tax and businesses taxes to tobacco and alcohol taxes increased in many states resulting in a net tax increase of $28.6 billion in fiscal year 2010.

The recession took its toll on state revenue performance in 2009 and the National Conference of State Legislatures (NCSL) tracks many of these tax increases in a new report State Tax Actions 2009. NCSL will continue to track similar measures in FY 2011 on its website.

According to the report, 24 states increased taxes by more than 1 percent, and only one state, North Dakota, cut taxes by more than 1 percent during 2009 legislative sessions. Half of the states made no significant tax policy changes.

  • The personal income tax was raised the most, increasing by $11.4 billion.
  • Business taxes were increased by $2 billion.
  • Tobacco taxes experienced another round of increases, as states raised tobacco taxes by $1.9 billion.
  • Taxes on alcoholic beverages increased by $193 million.
  • Motor vehicle and fuel taxes increased by $1.9 billion, with much of the net increase coming from vehicle tax changes in California.

NCSL's State Tax Actions 2009 presents information about the tax and revenue changes enacted by state legislatures during the 2009 calendar year, as well as actions approved by voters, mostly affecting FY 2010 tax collections. For 46 states, the fiscal year begins July 1 and ends June 30. Exceptions are Alabama and Michigan, where fiscal years begin in October and end in September; Texas, September to August; and New York, April to March.

States not only increased taxes, they also approved numerous non-tax revenue actions to help fund their budgets. Some of these changes included fees that generated $3.3 billion, combined with other revenue related actions that brought the combined revenue increase to $33.7 billion for FY 2010, compared to $9.2 billion for FY 2009.

This annual report is a cooperative effort of the National Association of Legislative Fiscal Offices (NALFO) and the National Conference of State Legislatures’ (NCSL) Fiscal Affairs Program.

You may download a free PDF of NCSL's State Tax Actions 2009, or contact the press room.

NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.