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45 Tax Foundation's Tax Review 1 (1984)

handle is hein.tera/tafoutaxt0048 and id is 1 raw text is: (Tax Foundation's [Tax Review State Tax Prospects, 1984 A Tax Foundation Staff Report Previous legislative tax increases, together with a 15- month period of vigorous economic expansion, appear to have eased fiscal conditions in most states. Legislative sessions, expected to convene in 44 states in 1984, will act on tax revision proposals that would have only a negligible effect on overall state tax yields, although ef- fects could be significant in a number of states. A Tax Foundation survey in late March found that 18 states were considering tax increases totaling $3.1 billion annually, while 12 states were weighing tax reductions of $1.7 billion. Approval of all these proposals could bring about a net $1.4 billion overall rise. However, if measures to extend temporary sales tax increases are considered, along with the expiration of income tax surcharges, the net increase would be only $764 million, less than four- tenths of one percent of state tax revenues (see table). Not all of the proposals now on the drawing boards will be enacted, and still others may be forthcoming dur- ing the year. It seems likely, however, that the result of legislative tax activity in 1984 will stand in sharp contrast to that of the three previous years, when a cumulative total of more than $16 billion annually in higher taxes was approved. One year ago, in fact, state legislatures were pondering tax-raising proposals aggregating more than $12 billion (see Tax Review, April 1983); by the end of 1983, $8.25 billion in higher taxes had been approved. While tax revision in recent years has generally been coupled with spending restraint aimed at offsetting ex- pected budget deficits, the 1984 proposals are in many instances linked to higher spending. As a percentage of total state taxes, the proposed in- creases in at least seven states are quite significant, rang- ing from about 9% in Kentucky to 25% in Louisiana (based on 1983 collections). Other states with proposed increases of 10% or more include: New Mexico, Okla- homa, South Carolina, Tennessee, and Utah. Among the 12 states where tax reductions are under consideration, the most significant tax relief would take place in Mich- igan, where the phase-out of a temporary increase may be accelerated (saving taxpayers $430 million). (In Illinois, corporate and personal income taxpayers will find their tax bills lower by $848 million, as temporary surtaxes enacted last year expire on schedule.) General sales taxes figure most importantly in the pro- posals for net increases ($1.3 billion), followed by motor fuels ($980 million), tobacco ($128 million), and alcoholic beverages ($90 million). Proposed reductions and expir- ing surcharges would, on the other hand, cut personal income taxes by $1.5 billion, even when proposed in- creases are taken into account. Corporate income taxes would also drop by a net $75 million. Thirteen states are considering proposals to change general sales tax rates. Increases are under study in Lou- isiana (passed), New Mexico, Oklahoma (passed), South Carolina, Tennessee (passed), and Vermont. Temporar- ily higher rates would be extended in Arizona, Idaho, and Utah. Reductions are proposed in Colorado, Ne- braska, Rhode Island, and Washington. Eleven states are considering changes in personal in- come tax rates: rate hikes in Alabama, Kentucky, Mis- souri, and Vermont; and rate cuts in Indiana, Michigan, Minnesota, Nebraska, Rhode Island, West Virginia, and Wisconsin. In addition, temporary surcharges would be allowed to expire in Illinois and Pennsylvania. Under 1984 legislative bills, corporate income tax rates would be raised in Alabama, Massachusetts, Missouri, Utah, and Vermont. On the other hand, Nebraska, Penn- sylvania, and Wisconsin may have rate reductions. A temporary increase enacted in Illinois in 1983 is likely to expire on schedule. Other taxes targeted for possible increases in 1984 in- clude motor fuels (eight states); cigarette and tobacco levies (four states); alcoholic beverage taxes (five states); motor vehicle registration fees and drivers' licenses (three states); and other new or increased taxes (eight states). Proposal Increases ... Decreases . Extension of Expiration o Net change 1984 Major State Tax Proposals Revenue effect (millions) . ..... +$3,074 ..............................I.......... - 1,7 12 temporary increases ...... + 344 f temporary increases ...... - 943 .... +$ 764 No. of states 18 12 2b 30 'Sales taxes in Arizona, Idaho, and Utah. bincome taxes in Illinois and Pennsylvania. Copyright 1984 by Tax Foundation, Incorporated, One Thomas Circle, NW., Washington, D.C. 20005 (202) 822-9050. ISSN 0040-0114 1

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