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1993 State Fiscal Prospects

1 min readBy: Gregory S. Leong

Download Special Report No. 7

Special Report No. 7

Executive Summary A new 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. Foundation survey of the 50 states reveals that new taxes in excess of $7.9 billion have been enacted or proposed for fiscal year 1993. Alter record tax increases of $17 billion in fiscal year 1992 and $10.3 billion in fiscal year 1991, the proposed FY’93 revenues will be the third largest increase since 1984. Three states, New York, Florida and Maryland, account for more than half of the total increase. New York has the largest tax increase on the drawing board — a plan to extract $1.6 billion in new revenue from a variety of measures, such as extending sunsetting provisions and increasing fees. Florida is contemplating $1.5 billion in new revenue, mostly from sales and business taxes. Maryland taxpayers, still adjusting to $90.1 million in new taxes from FY ’92, are preparing themselves for a hit almost ten times as large, $875 million enacted in April of this year.

Two symptoms of the nationwide recessionA recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years. , low personal income growth and sluggish personal consumption, continue to make a mockery of state revenue estimates. After last year’s substantial increases in individual and corporate income taxes and sales taxes, lawmakers are resorting to a variety of inventive revenue-raising measures: subjecting previously exempt items to sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. , increasing existing fees and imposing new fees on new products and services, extending temporary tax increases, deferring tax relief legislation, accelerating tax collections, and strengthening auditA tax audit is when the Internal Revenue Service (IRS) conducts a formal investigation of financial information to verify an individual or corporation has accurately reported and paid their taxes. Selection can be at random, or due to unusual deductions or income reported on a tax return. and administrative enforcement activities. All told, lawmakers will add another $7.9 billion to state coffers, totaling a record $35 .2 billion in new revenues in the past three years, $12 .2 billion more than was added in the entire decade of the 1980s.