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Consumer Reports


Instead of big tax hikes, states boost budgets with fees

http://www.jewishworldreview.com | (KRT) HOLLAND, Mich. - The trash bag tied to the metal arm of Lois Brands' folding lawn chair is a reminder that a summer day at the beach is not the carefree escape from reality it used to be.

When she and her husband, Al, leave the Lake Michigan beach, they pick up their trash, stuff it into the white plastic bag and take it home with them to Grand Rapids, Mich. That's because there are no longer trash barrels at Holland State Park, one of the most popular parks in Michigan.

"I think it's for the birds," Lois Brands said, grumbling.

Balancing the state budget in Michigan has come to this: taxpayers hauling away chicken bones, empty containers and soiled diapers. By removing the trash barrels at this park the state will save about $1,400 per year.

It's a little thing - many here call it an annoyance - among the hundreds of budget moves in Michigan and thousands in other states being made as governors and lawmakers try to nickel-and-dime their way to fiscal responsibility.

In the Midwest alone, more than $1 billion in fee increases have been approved by legislatures this year, according to data collected by the National Conference of State Legislatures.

"This is the most we've seen in at least a decade," said Mandy Rafool, a tax analyst with the group.

With a few exceptions, state legislatures have balanced their budgets - at least on paper - without boosting income or sales taxes, the biggest and most controversial revenue generators at a state's disposal.

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Many newly elected governors, including Illinois Democrat Rod Blagojevich, campaigned on pledges to not raise major taxes.

In keeping that promise, they have pushed through a blizzard of nuisance taxes, user fees and measures intended to avoid the political poison of raising income or sales taxes.

The budget fixes include higher tobacco and alcohol taxes; boosts in vehicle license charges; higher camping, hunting and court-filing fees, and a slew of sometimes-obscure levies, such as the Minnesota wild rice dealer license, Alaska's tax on studded snow tires and Utah's sales tax on cable and satellite television bills.

Illinois is raising fees, including on vehicle registration, hazardous-waste permits and boat registrations. The Office of Management and Budget estimates the fees will generate more than $300 million next year.

In the battle to balance state budgets, the tax equivalent of death by a thousand cuts has proved more palatable than the blunt instruments of major tax increases.

A recent survey by the Pew Research Center for the People and the Press found that two-thirds of the nation's state legislators would choose nuisance taxes or fees before raising major taxes. As the impact of other increases begins to hit home, that political preference gets tested among taxpayers, some of whom enjoy the white sands and red gabled lighthouse at Holland State Park.

"There are ways that we end up paying for the promise of no tax hike," said Kathy Lau, of Bath, Mich., who is a secretary at Michigan State University. "Would it be better if they raised taxes? I'm not sure, but I do know we're seeing a loss in state services."

Some of the no-tax-hike pledge consequences are not reflected in the small taxes and fees. State financial aid to local governments, for example, has been frozen or slashed in many states, putting pressure on local officials to seek increases in property taxes. And legislatures have sliced deeply into higher education funding because it is one of the few large discretionary-spending categories they can cut.

Reductions in university funding have led to cutbacks at state-supported schools and, in many cases, big increases in student fees and tuition. Tuition at Michigan State, the largest state-supported university in Michigan, was raised 10 percent for the school year starting in September.

Lau said there have been layoffs in her department.

And Mick Badgero, a graduate student at MSU who shared a sandwich with Lau at a picnic table, said courses he needs to complete his degree in computer science have been canceled.

"It's fine for them (governors) to promise not to raise taxes, but the fact is they have no control over the economy," Badgero said.

Others said it is better to hit taxpayers with smaller levies and optional taxes rather than slapping them with higher general taxes. Fee increases "are a fact of life, and they are better than an increase in property taxes," said Jim Rollins, a police officer in Dorr, Mich.

Evidence of the risk in tax increases can be seen in the bitter state budget war in California, where Gov. Gray Davis is trying to eliminate a projected $38 billion deficit and fend off a recall effort only months into his second term.

The political volatility of raising taxes still resonates in Michigan, where 20 years ago then-newly elected Gov. James Blanchard faced a fiscal crisis and, with the help of a Democratic-controlled legislature, pushed through an income tax increase.

That helped provoke a recall campaign against two Senate Democrats who voted for the higher taxes. Both were booted out of office and replaced with Republicans. The GOP has controlled the chamber ever since.

"The miasma of the recalls 20 years ago still has an effect," said Bill Ballenger, editor of the political newsletter Inside Michigan Politics.

"Voluntary taxes seem to be the way to go, on the grounds that you can sell it to the public," Ballenger said. "There's going to be a ripple effect from this, and a lot of this isn't going to be recognized by the public until later."

Even though state budget problems have been building since the stock market shudder in the spring of 2001, the remedies have represented a sudden reversal from the good fortune of the 1990s. Legislatures cut taxes by $36 billion during the `90s and much of that has been taken back by higher levies on cigarettes, alcohol, vehicle licenses or, in Ohio, a 1 percent boost in the sales tax to 6 percent that went into effect July 1.

In Michigan, about $250 million worth of fee increases are scheduled to go into effect Oct. 1, the start of the state's fiscal year. Those will include higher vehicle registration and court fees as well as minor charges for owners of pet stores, horse riding stables and tree nurseries.

The removal of the garbage barrels, state officials say, is an experiment to determine if people can deal with their own trash.

It is, in its own way, a symbol of government services that may be expendable when financial times are tough and the political climate is tricky.

"If you've got a big bag of trash and you don't want to take it home and no one's looking, what are you going to do?" asked Leanna Rollins, a bank manager from Dorr who was eating a fast-food hamburger at a picnic table.

Often the answer is to dump the trash in private business dumpsters just outside the park. Or in Elaine Blouw's garbage can near the park entrance.

"I used to have once-a-week trash service. Now it's twice," Blouw said.

"I see a lot of trash by the side of the road. It's just difficult for families. I feel sorry for them," she said.

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