U.S. States Reduce Taxes for First Time in 10 Years, Survey Says

U.S. states reduced taxes more than they increased them for the first time in a decade, according to a survey projecting a net decline of about $2 billion in fiscal 2012 from the preceding year.

Most of the decreases were due to the expiration of temporary taxes, such as in California (STOCA1), which had the biggest overall decline, at $8.3 billion, the National Conference of State Legislatures said in a report released today. The largest increase came in Illinois (STOIL1), which raised levies by $6.5 billion.

Nationwide, revenue from sales and use taxes fell by $5.2 billion, the most of any category, according to the report. The expiration of temporary increases in California and North Carolina (STONC1) reduced future annual revenue in those states by $4.5 billion and almost $1 billion, respectively.

“Most states continued to face substantial budget shortfalls during their 2011 legislative sessions,” the study said. “The net state tax reduction is a result of temporary tax increases expiring in a handful of states, not the result of strong fiscal conditions.”

Not counting the expiration of the temporary taxes, states increased levies by about $9 billion. Taxes rose $4 billion in 2010.

Personal income-tax collections rose in six states and fell in 21, for a nationwide net increase of about $3 billion, the report said. Twenty legislatures cut corporate taxes during their 2011 sessions, resulting in a net decrease of $804 million across the country.

To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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