The Rising Tide: State Tax Increases

The recession has hit states HARD. We now hear daily of layoff plans for state and municipal employees. Revenues have fallen dramatically. To counter this states have turned to tax increases to fund their deficits. A sampling of states that have raised taxes:

* California added 0.25% to each income tax bracket, effective January 1, 2009 and ending December 31, 2010. The state also increased paycheck withholding rates by 10% for each tax bracket, effective November 1, 2009.
* Connecticut added a third income tax bracket of 6.5% on income over $500,000 for single filers and $1 million for joint filers, effective January 1, 2009. The state also delayed increases to personal exemptions and credits for three years and added a 10% corporate tax surcharge for 2009-2011.
* Delaware added a new top bracket of 6.95% on income over $60,000, an increase from the former 5.55% top rate, effective January 1, 2009. Business gross receipts tax rates were also increased across the board.
* Hawaii added three new tax brackets effective January 1, 2009. The new rates are 9% on income over $150,000; 10% on income over $175,000; and 11% on income over $200,000. The state has also delayed sending out all 2009 refund checks until July 1, 2010 to help cover budget deficits.
* New Jersey created three new brackets for 2009: 8% on income over $400,000; 10.25% on income over $500,000; and 10.75% on income over $1 million.
* New York added two additional tax rates: 7.85% on income over $200,000 ($300,000 for joint filers) and 8.97% on income over $500,000. This is effective January 1, 2009 and is slated to end December 31, 2011. Beginning April 7, 2009, people who have adjusted gross income over $1 million cannot claim itemized deductions, except for 50% of their Federal charitable contributions deduction.
* North Carolina imposed a tax surcharge of 2% on people with income over $60,000 ($100,000 for joint filers) and 3% on people with income over $150,000 ($250,000 for joint filers), effective January 1, 2009 and ending December 31, 2010. The state also created a new 3% tax surcharge for corporations.
* Oregon voters approved the addition of two new tax brackets effective January 1, 2009, and ending December 31, 2011: 10.8% on income over $125,000 and 11% on income over $250,000. After 2011, the former bracket will be reduced to 9.9% and the top bracket will be eliminated. Oregon also increased corporate income taxes this year.
* Wisconsin added a new top rate: 7.75% on income over $225,000 ($300,000 for joint filers).

Source: Tonya Moreno, "Significant State Tax Changes for 2009 and 2010"