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All Contents © 2017The Kiplinger Washington Editors
By Pamela M. Prah, Associate Editor
| July 2015
Some states, still facing tight budgets after years of recession and slow recovery, are turning to tax increases to make up for the shortfalls. In some states, you’ll soon pay more for Gucci bags and other luxury goods. In others, soft drinks, cigarettes, gasoline and live entertainment will cost more.
Pay attention even if your state isn’t on this list. Some of the taxes are aimed at tourists and motorists passing through the states. And many other states may follow suit with similar tax hikes if these states’ efforts prove successful at raising revenues without upsetting voters.
The tax increases may come as a surprise, since there are more pro-business, antitax Republicans in state legislatures than at any point since 1920. Here’s a look at some of the tax increases kicking in this summer:
Buying a pair of Jimmy Choo shoes or even a T-shirt from the Gap will cost a little more in the Constitution State under a budget deal that is expected to yield nearly $1.7 billion in new revenue.
Starting July 1, yachts and other luxury items will be taxed at 7.75%, up from 7%, as part of a state budget plan for the next two years. And clothing and shoes under $50 will no longer be exempt from the state’s 6.35% sales tax.
The state tax on cigarettes also will climb — from $3.40 to $3.65 per pack on October 1, 2015, and to $3.90 per pack on July 1, 2016.
Connecticut’s wealthiest citizens and businesses will feel the biggest pinch. A projected $300 million will come from the addition of two income tax brackets above the state’s current highest rate of 6.7%. The new top rate: 6.9%.
Hotel guests will have to pay $5 more each night, thanks to a tax package that could yield up to $1 billion to fix the Peach State’s backlog of road and bridge repairs.
Drivers and owners of electric cars will also have to pay more. Motorists will pay an additional 6 cents for each gallon of gas starting July 1, 2016, under a new law that moves the state from a series of sales and excise taxes on gasoline to a single excise tax. Owners of electric vehicles face new registration fees ($200 a year for noncommercial electric vehicles, $300 for commercial). Meanwhile, heavy trucks will have to pay an extra “highway impact fee” of $50 to $100.
Counties also were given the green light to ask voters to approve a sales tax of up to 1% to fund local transportation projects.
Kansans will pay more for nearly everything they buy in the Sunflower State. Lawmakers raised the state's sales tax to 6.5% to close a $400-million budget gap. The hike came three years after Gov. Sam Brownback, a Republican, backed the largest tax cut in the state’s history.
The new rate, up from 6.15%, is effective July 1. Coupled with local sales taxes, Kansas now leapfrogs California to have the eighth-highest sales tax in the United States, according to the Tax Foundation.
Smokers will pay more, too. The per-pack tax on cigarettes goes to $1.29, from 79 cents, effective July 1. And beginning July 1, 2016, people who use e-cigarettes will be taxed 20 cents per milliliter of consumable material.
What happens in Vegas may stay in Vegas, but so will more of your money, thanks to a historic tax package that is expected to raise $1.5 billion over the next two years. Everything from hailing a cab, smoking and attending events will cost more in the Silver State.
Taxi passengers, including Uber users, will see a 3% excise tax on all fares, and the cigarette tax will go up a buck, to $1.80 per pack. That’s still a far cry from the nation’s highest tobacco tax, $4.35 per pack in New York state.
Most venues with live entertainment will have to charge a 9% ticket tax, instead of a sliding scale of 5% to 10%. The tax applies to fees for escort services, but not to rates charged by prostitutes at the state’s legal brothels.
Finally, a 0.35% sales tax boost that was due to expire became permanent. Nevada relies heavily on the sales tax and tourism because it doesn’t have an income tax. Most of the increases start July 1, although the live entertainment levy kicks in on October 1.
Motorists will have to pay more, but in return they’ll be able to drive faster on two major highways.
State lawmakers passed sweeping legislation earlier this year that raised the gas tax by 6 cents per gallon on April 1, to 28 cents. It also added 1 percentage point to the excise tax on vehicle purchases, making it 4%. The legislation allows counties and townships to raise property taxes for road and bridge work, if voters agree. The entire funding package is expected to raise $85 million per year for state and local infrastructure work.
In exchange, drivers can legally travel 80 miles per hour on Interstates 90 and 29, 5 mph faster than the old maximum speed.
Motorists will pay 5 cents more per gallon at the pump, starting Jan. 1, 2016. The revenue will help fund transportation projects and maintenance. In addition, counties can add a sales tax increase of a quarter-cent per dollar if voters give an OK. Before the hike, the Beehive State faced an $11-billion funding gap for critical road projects through 2040.
Meanwhile, homeowners will see a boost of $50 on property tax bills in November. The $75 million in new revenue will be used for education programs.
Soft drinks and cigarettes will cost more, while wealthy taxpayers will be able to take fewer deductions. The changes were aimed at closing a budget gap of nearly $100 million.
For the first time, Vermont’s 6% sales tax will hit soft drinks. The tax applies to nonalcoholic beverages that contain natural or artificial sweeteners, but not to those containing milk or milk substitutes, or to drinks that include at least 50% vegetable juice or fruit juice by volume. Also, smokers will pay an extra 33 cents in state taxes for cigarettes, raising the rate to $3.08 a pack by next year.
Millionaires in Vermont could pay about $5,000 more in taxes. The plan limits the amount filers can deduct from income taxes to $15,000 for an individual and $31,500 for a household. Vermonters also won’t be able to deduct from this year’s tax liability what they paid in state and local taxes the previous year.
Gas tax increases are also coming in Idaho (7 cents a gallon), Iowa (10 cents per gallon) and Nebraska (a 6-cent hike spread over four years).
Other states are likely to boost gas taxes in the coming years as Congress struggles to pass a long-term surface transportation bill to fund road and bridge repairs, and as the cost of deferred maintenance soars.
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