State Tax Update Archive
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Volume 7, Issue 19

California Sales Tax Increase
Former Gov. Pete Wilson (R) is responsible for the initiation of an automatic sales tax increase that kicks in when revenue and surplus funds dwindle. The quarter-percent increase is scheduled to begin Tuesday. In previous years, Gov. Wilson's sales tax plan caused the sales tax to decrease by a quarter percent each of those years when revenue and surpluses grew. Many Republican legislators fought the implementation of this year's increase during budget negotiations last summer, thereby stalling the process by almost one month. Conservatives observing the California economy's meltdown (the current budget shortfall estimate is $12 billion for FY02) blame Gov. Gray Davis (D) for poor energy and state-wide agency planning. Roger Salazer, spokesman for Davis's re-election campaign said that Davis signed into law $3 billion in tax relief during his first two years in office and "Governor Davis has been a fiscally prudent governor." (Associated Press, 12/27/01).

Hawaii Governor Must Have Read Keynes
Gov. Ben Cayetano (D) told state lawmakers 12/27/01 that he intends to spend an additional $1 billion on various state projects. Despite statements he made shortly after September 11th comparing the terrorist attacks to Pearl Harbor in terms of both events' severe impact on Hawaii's tourism industry and economy, Cayetano plans to propose $952 million in construction projects spending. Cayetano announced cuts of $16.5 million this year and $33.2 million next year. State budget director Neal Miyahira said that the Cayetano administration also needs to spend the $213 million reserve in the Hawaii Hurricane Relief Fund to balance the FY02 budget. The state faces a $315 million revenue shortfall as of last quarter's estimate. (Honolulu Advertiser, 12/28/01)

New Hampshire Legislature's 2002 Session Begins
The world's 6th largest legislative body will debate 534 bills in 2002, most the subject of taxes and education spending. Senate President Arthur Klemm (R-Windham) said that reviving the state economy and developing an effective response to terrorism are priorities for the 2002 session. Klemm, House Speaker Gene Chandler, and Gov. Jeanne Shaheen (D) have worked to spearhead terrorism legislation, although the cost of an effective response will have to balance with efforts to streamline state spending. 2002 is not a budget year in New Hampshire. Gov. Shaheen has already ordered a 1% across-the-board spending cut beginning 1/1/02. (Foster's Online, 12/28/01)

Florida Senate President Draws Fire from Businesses
Former campaign advisers and top aides, among other business advocates met 12/27/01 in Tallahassee to discuss Senate President John McKay's tax reform plan. McKay proposed overhauling the state's 1949-era tax code by broadening the tax base (eliminating so-called "special interest tax breaks," read: business growth incentives) and cutting the sales tax from 6% to 4%. McKay seeks support from the legislature to create a constitutional amendment encompassing his ideas, put to ballot in November 2002. McKay needs 3/5 of both houses of the legislature to succeed in creating the amendment. Gov. Jeb Bush (R) has not taken a position on McKay's proposal, as reiterated 12/27/01 by his spokeswoman Katie Baur: "It's a big idea and it deserves some thought. We'll keep an open mind." Former deputy chief of staff for Gov. Bush and public relations consultant Cory Tilly spoke on behalf of the business community: "[They] believe this is a tax increase on Floridians, and a tax break for out-of-state tourists." Lloyd Turman of the Florida Institute of Certified Public Accountants said that McKay's plan "recreates" the 1987 services tax, a huge debacle at the time. McKay has repeatedly attempted to avoid that comparison. (St. Petersburg Times, 12/28/01)

West Virginia Tax Increase Opponent Changes His Mind
Former Delegate Pat Hamilton admitted that his prediction was wrong that dire economic consequences would result from a hotel-motel occupancy tax. He thought that the occupancy tax would hurt state tourism more than it has, although the effects of the 1985 tax increase of 3% on the cost of hotel and motel rooms may take longer to fully observe. "I was generally opposed to taxes on anything," Hamilton recalled of his years in the state legislature. Now retired, Hamilton has chosen a modified philosophical approach to taxation regarding an optional 7% sales tax for cities and counties. "The cities do need more revenue," he said. (Charleston Gazette, 12/28/01)

Wisconsin Governor Just Wants to Talk
Gov. Scott McCallum (R) and his adviser Morris Andrews suggested ending state aid to local governments and allowing an optional county sales tax of up to 7.1% last week, drawing criticism from local officials who think the plan is unfair. Municipalities were not included when Andrews met in secret with lobbyists, teachers' union officials, and school administrators before he began making trips around the state to talk to local officials about the plan. Gov. McCallum quickly distanced himself from the plan by saying, "There are all kinds of ideas that people bring forth to me, some of which have better changes than others." Morris Andrews led Wisconsin's largest teachers' union in the 1980s. (Milwaukee Journal-Sentinel, 12/25/01)

Enemies of the Taxpayer for the Month of December: State Senators Hoffman, Gougeon, McManus, DeRossett and state Representatives DeWeese, Ehardt, Kuipers, and DeVuyst who signed ATR's Taxpayer Protection Pledge but voted for H.B. 5080, a bill to implement the Simplified Sales Tax Project (SSTP). States joining SSTP will work to develop means of taxing online sales.