No matter where you live in the United States, the answer is very likely to be yes. But it won’t be coming from the Federal Government. The next round of tax hikes is more likely to hit closer to home.
State governments are reeling as they lose tax revenue on every side. Property taxes are down, employment taxes are down, sales taxes are down, tourism dollars are down … but expenses are climbing. Stimulus money partially bridged the gap, but it will soon be a fading memory.
How bad could it get? Pretty bad, ccording to The Nelson A. Rockefeller Institute of Government. Here are some of the highlights of their report, released this past October.
- 42 out of 45 states with broad-based sales taxes saw declines, and 14 of those 42 saw double digit declines — the highest rate on record
- From 2009 through 2011, states are facing an aggregate shortfall of $230 billion
- Estimates are that it could take 5 years or longer for state revenues to recover.
And, when it comes to raising money, states have few options. Streamlining work processes, cutting services and staff reductions are one side, but higher taxes are most definitely the other. Look for increases to not only tax rates, but in what counts as taxable in the years to come. Maine, Mississippi, New York, Washington and Wisconsin have all enacted legislation impacting digital purchases in 2010.
The Internet is likely to be a hot target. So is the ever-expanding definition of “nexus,” or what it means to be considered as doing business in a state. California, Connecticut, Florida, Illinois, Michigan, North Carolina, Rhode Island, Tennessee and Texas are all looking at how to broaden their tax bases outside the state lines.
Tax rates in some states will be increasing, too: California, Maine, Massachusetts, Minnesota, Nevada, North Carolina and Utah will all be increasing sales or income tax rates next year. And municipalities are feeling the pinch. Expect increases in some areas of Alabama, Arizona, California, illinois, Oklahoma, Louisiana, Missouri, New York, North Dakota, Ohio, South Carolina, Tennessee, Texas, Utah and Washington.
CCH just released a great white paper on how states are coping and what may be coming your way in the future. You can pick up a copy of the 4-page report HERE.
Stay informed! At US TaxAid, we’re always looking to bring you the most current tax information out there, and to break it down into language everyone can understand. If you know anyone else who might benefit from the information resources you’ll find here, tell them to come and check us out. Remember, membership on our US TaxAid website is FREE.