How States Are Dealing With Budget Gaps States are raising taxes and fees to make ends meet in their budgets. But a researcher at the Urban Institute says it's unlikely that the housing crisis will be resolved. So, in a few years, these increases still may not generate enough money to pay the bills.
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How States Are Dealing With Budget Gaps

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How States Are Dealing With Budget Gaps

How States Are Dealing With Budget Gaps

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Unlike the federal government, states cannot run deficits, they have to balance their budgets. They can either raise taxes or cut spending. Some states though have come up with some novel ways to raise money in this recession.

NPR's Jeff Brady reports.

JEFF BRADY: State budget problems can seem overwhelming because the numbers are so big. Bert Waisanen is a fiscal analyst with the National Conference of State Legislatures.

Mr. BERT WAISANEN (Senior Policy Specialist, National Conference of State Legislatures): States had been - had a running number of $121 billion in projected budget gap, the last time we checked in April.

BRADY: He's working on updating that number now. Meantime, he's noticing some trends.

Mr. WAISANEN: A few states have had to raise income taxes, but they have done so in a temporary way, primarily, and often geared toward the higher income brackets, the upper income earners.

BRADY: Hawaii, for example, raised income taxes 2.75 percent on people who make more than $150,000 a year. Even more common than raising income taxes, 12 states have made driving a car more expensive by boosting gas taxes or license fees. Some states have broadened existing definitions on what's taxable to boost revenue. In Kentucky, cell phone ringtones downloaded from the Internet now are subject to the state sales tax. Massachusetts and Nevada both increased their sales tax rates.

Amber Smith(ph) of Boise, Idaho, opposes that.

Ms. AMBER SMITH: I don't agree with raising the sales tax. It hurts folks that can least afford it.

BRADY: Smith was in downtown Denver, taking in the sights. When told that at least 10 states have raised their tobacco taxes, Florida by a dollar a pack, Smith says she doesn't have a problem with that.

Ms. SMITH: You know, those are choices. You choose to smoke or you choose to drink. And if you don't want to pay the increased costs, those aren't things that are necessary to live.

BRADY: As you might imagine, someone who smokes has a different point of view. Mitchell Norton(ph) is from Fresno, California, and he thinks it's not fair that states tend to focus tax hikes more on tobacco than alcohol.

Mr. MITCHELL NORTON: It's a much easier target for them to raise tobacco taxes because the vast majority of people, especially people with families, are going to agree with it, and it's not going to raise too much of a political stink when they do so.

BRADY: Several states also have increased their taxes on tourists. In Nevada, the hotel tax is now up to 12 percent. Kim Rueben with the Urban Institute says when lawmakers pass taxes such as that, they're just responding to what their constituents want.

Ms. KIM RUEBEN (Senior Research Associate, Urban Institute): They generally like taxes that they don't have to pay for.

BRADY: Rueben says constituents also are more likely to agree with taxes if they're tied to specific services, like health care or education.

Now, here's the bad news from Rueben. The tax increases this year, well, they're probably not going to be enough.

Ms. RUEBEN: It doesn't seem like the housing crisis and what's going on with real estate is going to turn around anytime soon. I think we're going to have to, you know, tighten our buckles and be in for a little bumpy ride for a while yet.

BRADY: Gambling is another area states have looked to for money. In New Hampshire and New Jersey, lottery winners will now find their winnings are being taxed at a higher rate than before. And if you want to just get away from it all, well, good luck.

Idaho recently raised the cost of hunting and fishing licenses for people who live out of state. In Oregon, prices go up in January. A fishing license will cost five bucks extra, and a deer hunting tag will set you back another $4.50.

Jeff Brady, NPR News, Denver.

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