INDIANAPOLIS, JULY 29 -- While Washington has temporized over taxes for the past seven months, 40 states have rewritten their revenue codes, with three-quarters of them raising taxes to meet their budget needs, the National Conference of State Legislatures (NCSL) reported today.
The annual fiscal survey, released at the NCSL convention here, showed that 16 states face a real squeeze -- projecting balances less than 1 percent over their estimated spending. Virginia is classified as a state with a declining balance; Maryland, as improving.
Overall spending is budgeted to increase 6.2 percent, with the fastest rise -- 10.2 percent -- planned for corrections facilities and programs.
Irving J. Stolberg, the Democratic speaker of the Connecticut house and NCSL president, said the report showed "the presumption that the federal government can pass on responsibilities without revenues to the states because the states are doing so much better is a myth."
Stolberg conceded that his state was so prosperous it could increase support of many programs and grant property tax relief this year. But he pointed out that many agricultural and energy states were forced to raise taxes and restrain spending to balance their budgets.
All told, 31 states raised taxes this year, while nine cut them. (The survey did not include Massachusetts or Alabama.) The net increase was $4.6 billion.
Twenty states kept all or part of the "windfall" offered by revision of the federal tax code last year. But because such giants as California and New York were among the 13 states that passed on the benefits to their citizens, 80 percent of the potential windfall did not reach state treasuries.
Steven D. Gold, who led the team compiling the report, said the revisions of state laws had made their income tax codes more progressive. He said that "states tended to avoid the windfall by relying heavily on increases in standard deductions and personal exemptions, which benefit low- and moderate-income households relatively more than high-income households."
Many state tax actions paralleled the basic principles of the 1986 federal tax law, reducing the number of rates and lowering the maximum rate. Minnesota and New York now have just two tax rates, and Colorado only one. Top marginal rates were reduced in Colorado, Delaware, Hawaii, Minnesota, Oregon, Wisconsin and -- most dramatically -- New York and West Virginia, which virtually halved their top rates.
At the same time, 11 states eliminated income taxes on poor families and many others reduced the burden.