States Looking to Raise Taxes to Pay for Revenue Shortfalls
February 2, 2004
Though California has received the greatest amount of publicity over its fiscal woes, the reality is that almost all states are desperately seeking increased revenues. Current estimates peg combined state deficits for 2004 at about $80 billion -- deeper than they have been at any time over the past 50 years.
According to a recent study by CFO Magazine, the vast majority of corporate executives surveyed expect the states to raise taxes -- whether it is on alcohol, tobacco, consumption or income -- in order to deal with the fiscal shortfalls confronting them. Also, corporate tax officials suggest there are more subtle ways to increase revenues. For example, states can eliminate various corporate exemptions and tax credits that were originally offered to attract businesses. In addition, states have begun to aggressive pursue legislative changes such that companies cannot shelter themselves as effectively from taxation.
From their survey of corporate executives, CFO also ranked the states based on different criteria:
- New Jersey, California, Massachusetts, New York, and Pennsylvania were determined to provide the least fair and predictable tax environments.
- Four of these same states -- California, New Jersey, New York and Massachusetts -- also ranked as the states most likely to pursue clawbacks of corporate exemptions.
- Conversely, Nevada, Delaware, Vermont and Wyoming were, in general, viewed the most favorably in terms of their cooperation with businesses.
Last July, the Multistate Tax Commission (MTC), an organization of 45 states, released a study claiming that 2001 state corporate-income-tax revenues of $35.4 billion would have been 35 percent higher but for corporate tax sheltering. However, the business-sponsored Council on State Taxation (COST), argued that corporations pay an additional $358 billion in non-income taxes.
Source: Tim Reason, "The 2004 State Tax Survey," CFO, January 2004.
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