To Avoid Raising Taxes, States Try To Rack Up Fees Many states want to avoid raising taxes on residents during a recession. But with widespread budget deficits, states are trying to increase revenue by turning to special fees -- on hunting and fishing licenses, for example -- or by increasing taxes paid by visitors on hotel rooms and rental cars.

To Avoid Raising Taxes, States Try To Rack Up Fees

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From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

Few ideas are less popular in a recession than increasing taxes. So, how do states, counties and municipalities that are struggling financially raise money without raising taxes? For many, the answer is simple, just don't call them taxes, call them fees. Those are special taxes that don't hit the general public.

NPR's Greg Allen reports on how state and local governments are raising revenue in an anti-tax climate.

GREG ALLEN: Nearly every state in the country struggled to close budget deficits in 2009, and for many the struggle is not yet over. The National Conference of State Legislatures reports that 36 states already have budget deficits for the fiscal year that began in September. Gaps are only expected to grow as the new year gets underway.

There have been lots of cuts, and more are coming. Governors and legislatures have laid off and furloughed state employees, tapped rainy-day funds, cut spending on education and health care. And they have also raised revenue - what most people call taxes.

Few states have struggled more with the budget gap than New York. There, the legislature's solution was to raise a panoply of fees. Fees for bottle deposits, tax preparers, nuclear plants, horse racing. If there was a fee, they raised it. If there wasn't one, they created it.

Mr. DAN SHARP (Owner, Honeoye Lake Bait and Tackle Shop, New York): The only thing that they can't get by and say it's a fee or surcharge, rather than a tax, they're going to do it.

ALLEN: Dan Sharp owns Honeoye Lake Bait and Tackle Shop in upstate New York. The state also raised the cost of hunting and fishing licenses. Sharp says that move, combined with the poor economy, is hurting his business at a time when he should be busy, ice-fishing season.

Mr. SHARP: There's a few guys out on the lake. It just started here about a week or so ago, and - but not the crowds like you'd expect to see.

ALLEN: At least seven other states have also raised hunting and fishing fees. While politicians have generally tried to avoid using the T word, there are some taxes that have proved hard to resist. Many cities and states are raising taxes on hotel rooms and rental cars. The reason is obvious, they are taxes paid by out-of-towners, not hard working home folks, in other words local voters.

Craig Banikowski of the National Business Travel Association calls it taxation without representation. And he says that over the past year, cities and states across the country have been raising rental car and room taxes like never before.

Mr. CRAIG BANIKOWSKI (President and CEO, National Business Travel Association): September 1st, Indianapolis added additional hotel taxes. Boston on October 1st increased its hotel occupancy tax by two percentage points, Hawaii, Nevada. San Francisco just added a $3 fee on room rates of $200 or more in a special area close to Moscone Convention Center.

ALLEN: While raising taxes on constituents is always dicey, the sorry state of their budgets has forced a few states to do so. In Arizona, New Jersey, New York and Colorado, legislatures have suspended some property tax exemptions.

In Colorado, shutting down exemptions for senior citizens is saving the state $100 million annually. Mark Lowderman is a tax assessor in El Paso County. He says he's already heard from 30 or 40 seniors and they all share a common sentiment.

Mr. MARK LOWDERMAN (Tax Assessor, El Paso County): The general feel is that they think they're trying to balance their budget on the backs of the seniors.

ALLEN: Lowderman expects the outcry to grow once the property tax bills go out in the next few weeks. If there is such a thing as a popular tax, it would be on alcohol and tobacco, the so-called sin taxes. More than a dozen states raised taxes on alcohol, and 15 states raised tobacco taxes over the past year.

Danny McGoldrick with the Campaign for Tobacco-Free Kids says some states have raised their cigarette tax by a dollar a pack. Even so, he says, there's room for more.

Mr. DANNY MCGOLDRICK (Vice President of Research, Campaign for Tobacco-Free Kids): They go from a low of seven cents a pack in South Carolina to a high of over $3. So there's a lot of room for tobacco tax increases across the country, and we're hoping that's what's going to happen in the coming year.

ALLEN: State and local governments have been inventive - some might even say devious - in finding ways to increase revenue. One idea that's catching on across the country is automatic surveillance cameras to monitor red lights and speed zones. Typically, they're installed and maintained by private companies bringing cities a new revenue stream while improving public safety.

The state of Georgia has another new idea, a super speeder law that requires motorists caught doing 85 to pay a special $200 state fine on top of the local penalty. It's expected to raise $23 million in the coming year. And if it's successful, look for it to be coming soon to a state near you.

Greg Allen, NPR News.

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