In Washington, the “T” word is political dynamite. New federal taxes seem inevitable at some point, thanks to the gargantuan federal debt—just not yet. The only new taxes enacted by the feds recently have been on a tiny minority of wealthy earners and on institutions like banks and health insurers, which politicians can easily vilify. Other than that, they’d rather not talk about it.
[See how all the states rank in terms of higher—and lower—taxes.]
But many Americans are paying higher taxes anyway because states can’t borrow the way Washington can or put off the day of reckoning. The listless economy has shredded state budgets, forcing tough decisions nationwide about whether to slash services, raise taxes, or both. Last year’s big federal stimulus package helped, sending about $250 billion to states. But that emergency funding is starting to peter out and tax increases passed during the recession are finally starting to hit people’s wallets.
Over the last two years, 36 out of 50 states have raised taxes or fees, according to data from the National Association of State Budget Officers. The combined tab comes to more than $25 billion. The worst seems to be over, with proposals for the upcoming year amounting to just $3.1 billion in new state taxes. But those figures are premised on a steadily improving economy, which means new taxes could end up a lot higher if there's a dreaded double-dip recession. And many local municipalities are just getting around to raising their own taxes, since state and federal aid to many local governments is falling. In Congress, for instance, new aid packages that would prevent teacher layoffs and help pay for Medicaid have stalled, as opponents argue that the federal government can no longer afford such generosity.
To figure out where the pain is greatest, I used NASBO data to compile the total tax hikes in each state since 2009, including proposed tax increases for 2011. Then I divided each aggregate figure by the state's population, based on Census Bureau data, and ranked the states according to the amount of new taxes per person. The per-capita numbers don't mean every resident is forking over the same higher amount, since taxes are often skewed toward wealthy people and businesses. But they do reveal which states are in the most pain, and the types of new taxes passed in those states could find their way to others. Here are the states with the highest per capital tax hikes since 2009, along with some of the notable new taxes they've imposed:
New York. Total enacted and proposed new taxes, 2009–2011: $8.2 billion; $419 per person.
Enacted: Higher taxes on the wealthy and on tobacco, beer and wine, car rentals, and taxi rides; increased fees on motor vehicles, hospital stays, car insurance, tax preparation, utilities, and several other things; reduced tax credits for a variety of businesses.
Proposed: Additional taxes on cigarettes; new taxes on certain small businesses, soft drinks, and some medical services.
California. Total: $11.5 billion; $312 per person.
Enacted: 1 percentage point increase in the sales tax and a quarter-point increase in personal income taxes. Lower business tax credits; new fees on motor vehicles, vessels, and aircraft.
Proposed: A net decrease in gas and diesel taxes.
Delaware. Total: $253 million; $286 per person.
Enacted: 1 percentage point increase in taxes on incomes above $60,000; higher taxes on cigarettes, video lottery, utilities, and some businesses. New estate tax.
Connecticut. Total: $777 million; $221 per person.
Enacted: Higher income taxes on the wealthy and on medium-sized and large corporations; higher taxes on tobacco; accelerated estate- and gift-tax payments; various new fees.
Wisconsin. Total: $900 million; $159 per person.
Enacted: Higher taxes on the wealthy, lower capital-gains-tax exclusions, higher taxes on tobacco.
Arizona. Total: $1 billion; $154 per person.
Enacted: A 1 percentage point increase in the sales tax on most goods and services.
Kansas. Total: $425 million; $151 per person.
Almost all of the new taxes in Kansas are proposed for 2011, including an increase in the sales tax and the tax on tobacco.
Washington state. Total: $982 million; $147 per person.
Enacted: Higher tuition at public universities and a variety of fee increases.
Proposed: Higher taxes on cigarettes, carbonated beverages, hazardous substances, and some businesses.
Oregon. Total: $541 million; $141 per person.
Enacted: Higher personal and corporate income taxes, higher taxes on tobacco, higher motor vehicle fees.
Massachusetts. Total: $890 million; $135 per person.
Enacted: A 1.25 percentage point increase in the sales tax, elimination of the tax exemption for alcohol, new taxes on direct-broadcast satellite service.
New Hampshire. Total: $161 million; $121 per person.
Enacted: Higher taxes on tobacco, some motor vehicle records, hotel rooms, gambling winnings; higher fees on boat and motor vehicle registrations and some government activities.