The Six States Where Taxes Are Soaring

As the economy struggles to recover, state and federal budget deficits continue to be the subject of increased attention. Just last week, the congressional budget office said that President Obama's budget will produce a $1.3 trillion deficit in 2012 if enacted. It would be the fourth straight year of $1 trillion-plus deficits.

Many states have not been faring much better in their attempts to balance the budget. The recent recession resulted in some of the worst declines in state revenue since World War II, according to a recent report on state budgets by the Brookings Institution. In fiscal year 2010, a record 43 states faced budget deficits. In their fight to shrink their deficits, states have cut spending by slashing programs and lowering costs, while increasing revenue mostly by raising taxes.

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According to the Brookings report, a whopping 40 states raised taxes between fiscal year 2009 and 2011. Only eight cut taxes. Based on the report, 24/7 Wall St. examined the six states that increased revenue from taxes by 9% or more during the period. While these states increased revenue the most, spending cuts appear to be critical to managing deficits for nearly all of the states.

The media has focused on taxes, pointing out that revenue from all state taxes increased by nearly $24 billion in 2010, the largest nominal increase on record. However, the $24 billion, which reflects a 3.5% increase over the previous year's revenue, "was actually less in percentage terms than during prior recessions in the 1980s and 1990s," Tracy Gordon, author of the report, said in an email to 24/7 Wall St. "The bulk of tax increases were in a few large states, like California and New York, and have now expired," Gordon added.

In reality, while taxes have played a part, nearly all of the states have been forced to cut government services to balance their budgets. In the 2011 fiscal year, 29 states made cuts to services benefiting the disabled and elderly, 34 reduced funds for K-12 and early education, and all but six states reduced positions, benefits or wages of government employees.

Read more: http://www.foxbusiness.com/personal-finance/2012/03/21/6-states-where-taxes-are-soaring/#ixzz1qDyuK0yF