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Tuesday, August 17, 2004

The State Tax Squeeze

One of the points Howard Dean made during the primaries was that the Bush tax cuts were just resulting in state tax increases, as the federal government cut aid to the states. Progressive journalist David Sirota has been making this point too, as have Jonathan Weisman and Neil Irwin, writing in the Washington Post. Sirota also points out that four times as many people (49%) report that their overall taxes (federal state and local) have gone up, as report that their taxes have gone down (13%).

According to the National Association of State Budget Officers (report: big pdf), Dean's analysis was reasonably accurate. In 2001, seven consecutive years of state tax cuts came to an end. Since then, state taxes have gone up $18.2 billion dollars, on net, and are slated to rise another $5.4 billion next year. So state taxes have gone up about $165 per household on average.

How does this compare to the Bush tax cuts? According the the CBO, the middle 60% got a federal tax cut of about 2% of their income, which would be about $840 for a household at the median income of $42,000. So state tax increases offset a good chunk of the Bush tax cuts, about a fifth. Of course, property taxes have gone up too, as the states in turn cut aid to local governments.


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