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1 Paul G. Merski & Gregory S. Leong, 1992 State Fiscal Prospects 1 (1991)

handle is hein.taxfoundation/srdxz0001 and id is 1 raw text is: A            '

1992 State Fiscal Prospects

by Paul G. Merski and Gregory S. Leong

A new Tax Foundation survey of the 50
states reveals that nearly half will wrestle with
record deficits in fiscal year 1992 and plan to
combat them with new and higher taxes. Of the
$11.1 billion in new taxes pro-
ession has      posed, five states account for
68 percent of the revenue: Cali-
ite revenue     fornia, Connecticut, New
ulai, low       York, Pennsylvania and
Texas. (See tables 1 and 2 for
id weak         tax proposals and table 3 for
ption           general fiscal priorities.) Each
of these five states face an
stunted         FY'92 deficit well over one
and sales      billion dollars. The largest is
projected in California - $12.6
billion. New York is $7.6 bil-
lion short, while Pennsylva-
nia and Connecticut will face shortfalls esti-
mated over $2.5 billion. Texas faces a $4.5 billion
deficit for its 1991-93 biennial budget.
The nationwide recession has made a mock-
ery of state revenue estimates. In particular, low
corporate profits and weak personal consump-
tion expenditures have stunted corporate in-
come tax and sales tax revenues. While some
states plan to limp by with measures such as

On the personal income tax
front, more than a third of the
states have tax hikes on the
drawing board that will net $5.1

accelerating tax collections,
increasing fees, eliminating
tax credits and extending
temporary tax hikes, the mag-
nitude of anticipated budget
shortfalls has caused many
to tap the big three state rev-
enue sources - sales, indi-
vidual and corporate income
taxes. Last year's federal in-

creases on gasoline, alcohol, and cigarettes have
reduced states' willingness to raise more of their
own tax revenue from those sources.
On the personal income tax front, more
than a third of the states have tax hikes on the
drawing board that will net $5.1 billion. Con-

necticut and Tennessee, which currently levy
income taxes limited primarily to interest and
dividend income, are eyeing broad-based indi-
vidual income taxes. Texas, one of only seven
states which share the distinction of having no
individual income tax, has plans that would
reduce this select group to six. New Jersey and
Rhode Island have already enacted increases in
June 1990 and February 1991 respectively, effec-
tive in FY'92, and two more states, Kansas and
Vermont, are seeking rate increases. Arkansas
and South Carolina are alone in proposing re-
ductions in personal income taxes by either
narrowing the base or lowering the rate.
Table 1
Proposed Fiscal 1992 Net Tax
Increases by Major Type of Tax
($ Millions)
Tax                         Net Amount
Personal Income               $5,145.7
Business                        1,340.2
Sales and Use                    630.5
Motor Fuel                       723.6
Cigarette and Tobacco            408.4
Alcoholic Beverage               205.6
Property                          45.0
Miscellaneous                   1,226.0
Total*                       $11,084.0
* Includes $1,359 million in proposed tax increases
that are unallocable by type: $200 million in Illinois,
$456 million in Missouri, and $703 million in
Businesses are the next most popular target
for state tax raisers this year as 16 states plan to
extract $1.3 billion in FY'92 revenue from them.
Five states-Arkansas, Kansas, Kentucky, New
Hampshire and Pennsylvania - are seeking
higher rates, while Minnesota, Oregon, and
Wisconsin are proposing to broaden their bases.

Paul Merski is Director of Fiscal Affairs and Gregor, Leong is Research Associate at the Tax Foundation.

The nationwide rece
made a mockery of sti
estimates. In particr
corporate profits ar
personal consum
expenditures have
corporate income tax
tax revenues.

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