With the beginning of every New
Year, there are changes in the laws of each state, including changes in taxes.
Some states are looking to increase taxes, some are looking to lower them, and
this is in a broad range of taxes, including sales taxes, excise taxes, and
income taxes, both on the personal and corporate levels. Other states, such as Connecticut
and California are looking to increase income taxes. What makes these tax
changes extra interesting is due to the fact that they are occurring in an
election year. The republicans are looking to take over the Executive branch of
the government, and will point towards the lowered taxes in certain states as
backing their economic programs. On the other hand, the Democratic Party will
point towards the tax raisings to back them up. In the current uncertain economic
climate, no one can be sure of what effect any of these changes in taxation will
have on the U.S. economy. Lowered income taxes for individuals could bolster
the economy more, but there can be no guarantee. I think this is because of the
way the individual spender. For example, in Massachusetts, the personal income
tax is going to decrease from 5.30% to 5.25%. This decrease of 0.05% is seen as
incredibly minor to most normal individuals, especially those who have no
background in economics. To them, this might be seen just some way of the
government trying to gain some more approval from the citizens. Since they see
this change as quite marginal, it probably will not cause any real increase in
spending.
The new taxes that could help
bolster the current economic state are some of the new excise taxes being
introduced throughout the country. These excise taxes are mostly focused around
tobacco and alcohol, which are goods that tend to see high demand no matter the
price or taxation on them. Some states are hoping to combine these excise taxes
with increases in legalized gambling and casinos. Casinos make significant
amounts of money off of alcohol as well as their gambling revenues, so if the
states increase alcohol taxes, and see success in organized gambling, the
economic benefits could be doubly helpful for the states.
Source: http://money.cnn.com/2011/12/21/news/economy/state_taxes_2012/index.htm?iid=SF_PF_River
It's interesting that the democrats would use an increase in taxes for support since most people look for lower taxes. Also the taxes on inelastic goods such as tobacco and alcohol would be most likely if consumer excise taxes were to increase. Most people may not realize that this increase in taxes could double with the usual vice tax that is imposed on goods the government considers "vices". Most state governments double the normal tax rate of goods such as alcohol and receive twice the revenue that the consumer is willing to pay.
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