State Tax Actions 2009
The recession took its toll on state revenue performance in 2009, leading numerous state legislatures to increase taxes and fees to help fill budget gaps. Actions taken by 50 states resulted in a net tax increase of $28.6 billion for fiscal year (FY) 2010. The tax increases represent 3.7 percent of prior year total tax collections, the largest increase since 1991, when the net increase was 5.4 percent of revenues. By comparison, in FY 2009 the net tax increase was 0.5 percent.
Twenty-four states increased taxes by more than 1 percent, while one state cut taxes by more than 1 percent. Twenty-five states made no significant tax policy changes. This report includes tax actions taken during regular and special legislative sessions in 2009, as well as actions approved by voters, mostly affecting FY 2010 tax collections. Information was obtained through the National Association of Legislative Fiscal Offices. Highlights include the following:
- All tax categories monitored in the state tax actions report showed net increases in FY 2010.
- The personal income tax was raised the most, increasing by $11.4 billion.
- Business taxes were increased by $2 billion.
- States increased sales tax rates and stripped exemptions, generating an additional $7.2 billion.
- Health industry taxes faced higher increases than in past years, in part as states sought matching federal dollars. The net increase was $2.5 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.
- Miscellaneous taxes were raised by $1.4 billion.
- States made property tax changes, resulting in reduced property tax relief efforts in some states.
States not only increased taxes, they approved numerous non-tax revenue actions to help fund their budgets. These changes included fees and accelerations that generated $5.1 billion, bringing the combined revenue increase to $33.7 billion for FY 2010, compared to $9.2 billion for FY 2009.