Executive Summary
Following the record 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. increase of $1.7 billion for FY’92, state governments have enacted tax increases for FY’93 that will total $5.5 billion. Taxpayer anger at the large hikes in FY’91 and FY’92 has forced many states to moderate new demands this year, despite current budgetary stress caused by record state spending and a weak economy. The largest increases this year were in general 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. es, motor fuel taxes, and health care provider taxes.
This year’s tax increase will further erode after-tax personal income. From 1981 to 199I, state taxes grew at 6.6 percent annually while personal income grew at a lower 5.7 percent clip. Tax growth outpaced income growth in 43 states.
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