2010 Changes for State TaxesPublished:
With the recession taking its toll, there are many state tax changes for the year 2010. As a taxpayer, it is important to stay current with any changes on both the state and federal level. If you are unaware of tax changes in your state, you may end up making mistakes that could cost you a lot of money.
To recoup lost revenue (from the economic recession), many states have taken substantial measures ? including increasing certain tax rates and cutting some tax exemptions. Along with this, state fees have also been increased across the board. Of course, these actions do not come as a surprise to most people. By looking at the past, we can see that states typically turn to tax hikes as a way of combating recessions. Increasing new revenue in this manner provides a short-term economic boost.
In at least 20 states, an increase in tax rates has helped to boost their revenue. Of these states, about half of them have increased tax rates by more than 5%. The states that have raised their taxes include: Oregon, North Carolina, New York, New Hampshire, Nevada, Massachusetts, Indiana, Florida, Delaware, and California.
Over the next 2 to 3 years, most taxpayers should expect similar trends to continue. In many cases, there is a period of several months between the end of a national recession and the recovery on local and state levels. State tax revenues generally suffer during recessions due to lost jobs, lower wages, and an overall decrease in consumer spending.
Many economic experts believe that state budget gaps will reach $180 billion in the year 2011 ? with an additional $120 billion in 2012. As you know, it is essential for state governments to address these gaps instead of sitting back and hoping for the best. Unfortunately, taxpayers are often the ones who have to take the biggest hit ? in many cases, by paying more taxes.
There are a variety of other state tax changes that have taken place recently. In the State of California, for example, a 0.25% increase was added to each individual income tax bracket. Along with this, California has also reduced a tax credit for dependents. While these moves may not seem dramatic, they are expected to increase state tax revenue by as much as $5 billion. Fortunately for the citizens and residents of California, these state tax changes are set to expire at the end of year 2010.
If you are worried about the tax changes in your state, it’s recommended that you get in touch with your state’s department of revenue or contact a local tax professional. The more you know about current and evolving tax laws, the less mistakes you will make and the more money you will be able to save.