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44 Tax Foundation's Tax Review 1 (1983)

handle is hein.tera/tafoutaxt0047 and id is 1 raw text is: (Tax Foundation's Tax Review State Tax Prospects, 1983 A Tax Foundation Staff Report Legislatures in at least 43 states are considering bills that would boost taxes by more than $12 billion annually, according to a Tax Foundation survey as of early March. Both the universality of the drive for new revenues and the amounts sought this year are unprecedented. Among the 49 states holding regular sessions in 1983, all but 6 have tax-raising measures before them, or have already approved them. In annual surveys extending back over two decades, Tax Foundation analysts have found no previous year in which so many states were eyeing tax increases or in which the amounts proposed were so large. There is no way of knowing at this point how much of the aggregate potential increase the states will ap- prove. Whatever it is, the 1983 increment will come on top of some $8 billion in higher annual tax bills that were approved in over half the states in the two previous years. Most of this year's activity focuses on forthcoming budget periods-fiscal 1984 alone, or the next two years for states with biennial budgets. In many cases, however, states are still patching tip their finances to avoid deficits in the current fiscal year, which ends on June 30, 1983, in most states. The evidence suggests that state budget- makers by and large have been overly optimistic in past projections of future economic conditions and state rev- enues. While there have been some apparently sharp cutbacks in spending, and various budgetary devices have been used to ease financial strains (speeding up tax collections, borrowing, drawing down existing balances, postponing some outlays to a future fiscal period), these have apparently been insufficient to balance projected budgets in the large majority of the states. The result has been widespread revenue shortfalls. Tax proposals in 1983 resemble those of 1981 and 1982 in that the perceived revenue needs are so sizable that the most productive tax sources are frequently being tapped to fund them. These are the broadly based general sales and personal income tax levies. At least 23 states will consider raising the rate and/or broadening the base of the sales tax, for added revenues of $5.3 billion an- nually (more than two-fifths of the total proposed). Per- sonal income taxes, also heavy targets for higher reve- nues in 1982, may be raised again in 13 states by a total of $4.2 billion (one-third of the proposed annual in- crease). Other important sources of prospective new revenues include severance taxes in 4 states for $720 million a year; gasoline taxes in 17 states for $730 million; corporate income taxes in 10 states for $403 million; cigarette excises in 14 states, $237 million; alcoholic beverage levies, 11 states and $143 million; and other sources in 18 states for $510 million in new annual revenues. Selected State Reports Despite a considerable drop in projected revenues, Alaska will have enough money for the next fiscal year, according to the governor. Legislators will consider a gasoline tax increase from 8c to 18c per gallon. Arizona's chief executive proposed dealing with a pos- sible $100-200 million deficit in fiscal 1983 by program cuts, acceleration of tax collections, and a one-time de- ferral of income tax indexing. Hikes in the motor fuels tax, for a highway building program, and in alcoholic beverage taxes, for alcoholism treatment programs, may be considered. While Arkansas's governor recommended no large tax increases, legislators will consider proposals to raise the sales tax rate from 3% to 4%; hike the cigarette excise; and subject cigarettes to the general sales tax. California's governor originally proposed that no taxes be raised, suggesting that the 1983 deficit of $1.5 billion be managed through a mix of spending cuts, borrowing, and shifts of part of the deficit to the next fiscal year. For fiscal year 1984, however, subsequent action opens the possibility for triggering in a 1% sales tax hike in No- vember 1983, should revenue collections fall below a specified level. Legislative proposals for other changes include: 10% personal and corporate income tax sur- charges, higher tobacco and alcoholic beverage excises, and a new 6% severance tax on the value of crude oil. Copyright 1983 by Tax Foundation, Incorporated, 1875 Connecticut Avenue, N.W., Washington, D.C. 20009 (202) 328-4500 1

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