2010 State Taxes Increased at Record Levels

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2010 State Taxes Increased at Record Levels

Trying to combat budget deficits made worse by the recession, many states raised income taxes by as much as 5%.

Here’s some bad news for tax haters: in 2010 state taxes soared as never before.

Thanks to the Great Recession, state governments are cash strapped as they haven’t been since World War II. In 2010 a record-breaking 43 states faced budget deficits.

Unlike the federal government, states can’t really borrow their way out of budget deficits so they have to make the hard choices our President and Congressmen routinely put off: cutting government programs and, you guessed it, raising taxes.

2010 witnessed the largest outright increase in state taxes ever, with combined revenues rising by a total of $24 billion.

The tax increases occurred mostly in a few large states. If you live in the rest of the country you very well may have been able to avoid getting hit by these new taxes.

Most of these states raised taxes to combat soaring budget deficits. But even after tax increases, the budget gaps for states like California, New York, and Illinois remain some of the highest in the country.

Which states suffered the biggest increases to their personal income tax in 2010?

  • California – increased personal income taxes by more than 5%
    • In 2010 the Golden State’s budget deficit reached $45.5 billion, 52.8% of its general fund.
    • Along with the increase in personal income taxes, the state raised sales and corporate tax rates by 5% as well.
  • Illinois – increased personal income taxes by more than 5%
    • Hit particularly hard by the recession, the Land of Lincoln is suffering from a $13.5 billion budget gap that amounts to 40.2% of his general fund.
    • Not only did the state increase personal income taxes, the corporate tax rate also jumped from 4.8% to 7%.
  • New York – increased personal income taxes by more than 5%
    • New York faces an only slightly less dire budgetary shortfall, with a $10 billion deficit at 17.6% of the general fund.
    • In addition to its personal income tax increases, it raised cigarette taxes by 5%.
  • West Virginia – increased personal income taxes by more than 5%
    • Unlike the other states that hiked taxes, the Mountain State actually weathered the recession relatively well, suffering from a deficit only 8.2% of general funds.
    • Nonetheless the state raised personal income taxes and cigarette taxes by more than 5%.
  • Rhode Island – increased personal income tax by between 1% and 5%
    • The housing collapse hit the nation’s smallest state especially hard, causing it to raise personal income taxes and cigarette taxes by more than 5%.


Alas, no matter how much you despise taxes, these increases are inescapable. Don’t think you can hide from your 2010 taxes, because your problems will only get worse. The best thing to do is file your 2010 taxes as soon as possible.

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