As many states across the nation experience worsening budget woes, many are turning to residents to make up the difference, raising taxes in hopes of closing a nearly $96 billion combined deficit.
Some states have already enacted a variety of tax increases, while others are considering hefty budget cuts, said the American Legislative Exchange Council, a Washington, D.C.-based think tank advocating smaller government and free-market reforms.
“One must wonder when state budgets will begin to see the light of day,” said Michael Flynn, ALEC’s director of policy and legislation. “States continue to address deficits with a mix of spending cuts, tax increases and the use of one-time funds. But they’re using duct tape instead of fixing the plumbing.”
The organization says Colorado, Iowa, Massachusetts, Michigan, Minnesota, New Hampshire, Tennessee, Texas, Virginia, Washington and Wisconsin are states slated to slash their budgets.
Meanwhile, states that have enacted or are considering tax increases include Alaska, Arkansas, California, Connecticut, Georgia, Idaho, Kansas, Maryland, Missouri, Montana, Nebraska, New Jersey, Nevada, North Carolina, Ohio, Pennsylvania, South Carolina, and Washington.
According to ALEC’s research, the top 10 states experiencing the worst budget woes are: California, $31.4 billion; New York, $11.5 billion; New Jersey, $5.2 billion; Texas, $4.95 billion; Illinois, $4.8 billion; Massachusetts, $3.2 billion; Florida, $3 billion; Pennsylvania, $2.4 billion; Minnesota, $2.1 billion; and Maryland, $2 billion.
Some states are relieving their cash-flow trouble with tobacco settlement money. Tobacco giant Philip Morris met a Tuesday deadline by paying $2.6 billion to 46 states under the 1998 landmark agreement after an Illinois judge cut in half the initial payment of $12 billion. The company plans to make additional payments as its appeal in that case continues.
The Associated Press reported that Kentucky is using its share of the money to diversify its tobacco-based economy, while Kansas puts its settlement money in an education trust fund. Michigan is using it to pay for college tuitions and prescription drugs for seniors.
Montana also uses tobacco money to pay for prescription drugs, as does Maine and Vermont.
States also are cutting budgets by spending less on tourism promotion and letting inmates out of jail sooner.
In terms of tax increases, states are turning to old favorites – “sin” taxes on cigarettes, gambling and liquor – and standbys such as property-tax hikes.
In Wisconsin, lawmakers are looking at a nearly $1 billion property-tax hike; Illinois is considering hiking its casino tax. Maine is considering an income-tax hike, while Florida legislators may hike service fees.
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