Special Report No. 3
Executive Summary 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 proposed, five states account for 68 percent of the revenue: California, Connecticut, New York, Pennsylvania and Texas. Each of these five states face an FY ’92 deficit well over one billion dollars. The largest is projected in California —$12.6 billion. New York is $7 .6 billion short, while Pennsylvania and Connecticut will face shortfalls estimated over $2.5 billion. Texas faces a $4.5 billion deficit for its 1991-93 biennial budget.
The nationwide recession has made a mockery of state revenue estimates. In particular, low corporate profits and weak personal consumption expenditures have stunted corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. and sales tax revenues. While some states plan to limp by with measures such as accelerating taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. collections, increasing fees, eliminating tax credits and extending temporary tax hikes, the magnitude of anticipated budget shortfalls has caused many to tap the big three state revenue sources — sales, individual 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.
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