State Tax Actions 2010

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Cover of State Tax Actions 2010 publicationExecutive Summary

The impact of the severe economic recession that began in December 2007 continued to create substantial revenue shortfalls in 2010. As a result, many state legislatures increased taxes and fees for the ninth consecutive year as they worked to shore up state budgets. Overall, states enacted a net tax increase of nearly $4 billion in 2010 (FY 2011) and a total revenue increase of nearly $5.5 billion. This represents an increase of 0.6 percent, which is substantially lower than the previous year’s increase. By comparison, the net state tax increase in 2009 (FY 2010) was $28.6 billion and reflected a tax increase of 3.7 percent of prior year total tax collections.

This report includes tax actions taken during regular and special legislative sessions in 2010, as well as actions approved by voters, mostly affecting FY 2011 tax collections. Fifty states and the District of Columbia provided information, which was obtained through the National Association of Legislative Fiscal Offices. Highlights include the following.

  • Twelve states increased taxes by more than 1 percent, while one state cut taxes by more than 1 percent. Thirty-seven states made no significant tax policy changes.
  • Seven of the eight tax categories monitored showed net increases.
  • The personal income tax was the only category with a decrease, reporting a net cut of $656 million.
  • Sales and use taxes were raised the most, increasing by $1.7 billion.
  • Business taxes were increased by $494 million.
  • The health industry was affected for another year, in part because states sought matching federal dollars. The net increase was close to $1.3 billion.
  • States raised tobacco taxes by $603 million.
  • Taxes on alcoholic beverages increased by $34 million.
  • Motor fuel taxes increased by $48 million.
  • Miscellaneous taxes were raised by $402 million.
  • States made several property tax changes, resulting in reduced property tax relief efforts in some states.

In addition to tax changes, states made substantial nontax revenue changes during 2010—such as fee increases, revenue accelerations, amnesty programs and tax compliance initiatives—for a net increase of more than $1.5 billion. This resulted in a combined revenue increase of $5.5 billion, which is $28 billion less than the $33.7 billion total revenue increase in 2009.