Because the federal income tax is the biggest and usually the first tax we see listed on our pay stubs, we naturally tend to focus on it.

But state government takes a bite out of our spending money, too. Bankrate will help you stay on top of what your localities are collecting -- income, sales, personal property or investment taxes, or often a combination of all.

Here's a look at some recent tax actions across the nation.

Food sales tax in Virginia slashed Jan. 1
RICHMOND -- The first of four cuts in Virginia's tax on food went into effect with the new year.

The half-percent reduction on "food purchases for human consumption" will be followed by similar percentage cuts on April 1 of 2001, 2002 and 2003. By the end of the phased-in rate-cut, the food tax will drop from 4.5 percent to 2.5 percent. The rate decrease affects the state portion only; the 1-percent local food tax will remain steady.

Food specifically eligible for the tax relief include most grocery products, such as staples, bakery foods, cooking ingredients, snack foods, "accessory items" (for example, carbonated beverages), health foods, specialty dietary items, infant formulas, ice and cold prepared foods (for example, luncheon meats).

The Virginia Department of Taxation noted that the following items do not qualify for the tax break: alcoholic beverages, vitamins, tobacco products, cleaning supplies, cooking utensils, cosmetics, health aids, medicines, minerals, paper products, soaps and detergents, toiletry items and pet foods.

Wide-ranging tax breaks for Georgians
ATLANTA -- Thanks to a surplus in the state's unemployment benefits trust fund, Georgia employers will see the taxes they pay into the program cut by almost $1 billion over the next four years. More than half of them will pay no unemployment taxes at all during this time.

Property taxpayers also may get a little help through the "taxpayer's bill of rights" which Gov. Roy Barnes pushed through the 1999 General Assembly.

The law requires, in part, that local governments roll back rates after raising the value of property through a reassessment program, or hold a series of public hearings to explain why they won't. Bill supporters say it is designed to prevent "back-door" tax increases that occur when local officials don't reduce the rate to offset the effect of reassessments.

Medical supplies exempt from California sales tax
A wide array of medical supplies would be exempt from sales tax under new regulations adopted in December by the California State Board of Equalization. The state's Office of Administrative Law must give the exemption final approval.

Medical supplies exempted are:

• Glucose strips and test puncture lancets
• Hemodialysis products and other kidney dialysis machines, required by physician
• Mammary prostheses
• Ostomy appliances
• Catheters, including aortic and coronary angioplasty balloon catheters
• Insulin and insulin syringes furnished by a pharmacist.

The ruling also broadens the definition of a "prescription" to an oral, written or electronic-transmission order by a physician, dentist, optometrist or podiatrist licensed in California and given individually to the person or persons for whom ordered.

Washington ballot initiative spurs further tax action
SEATTLE -- In the wake of a tax-limiting ballot initiative, Washington Gov. Gary Locke has proposed a 6.2 percent cut in state property taxes, while transportation workers and city officials have gone to court to fight the loss of tax revenue.

Passed by voters in the November general election, Initiative 695 repeals the motor vehicle excise tax and eliminates $750 million in annual money used for transportation and transit services, local government public safety, and health programs.

The property tax cut would begin with taxes due in 2001. In recommending the cut, which goes to the state Legislature when it convenes on Jan. 10, Locke said that the ballot initiative, while aimed solely at the car tax, indicates that voters don't like any personal property taxes.

Locke also suggested a constitutional amendment to "smooth out increases" in property tax assessments. The amendment would allow the averaging of large increases over four years, removing "sudden spikes" from tax bills. The governor also wants to exempt senior citizens and persons with disabilities from the state property tax levy.

Meanwhile, a labor union, two Puget Sound municipalities and a community council are asking the state's superior court to delay implementation of the initiative, which was set to begin Jan. 1. They argue that it illegally requires an automatic referendum on all future tax and fee increases and is too broad in its coverage.

The lawsuits also contend that the initiative is unconstitutional because it improperly revises and repeals portions of the Washington State Code and will cause irreparable injury to public transit workers in several counties because much of the motor vehicle excise tax is dedicated to transit operations.

Holocaust reparation payments not taxable in Illinois
CHICAGO -- Holocaust survivors and their heirs are exempt from paying state taxes on reparation payments, thanks to a new Illinois state law.

House Bill 1120 specifically amends the Illinois Income Tax Act to grant a deduction of the income received by taxpayers because of their status as victims of persecution. The measure also excludes income received as a victim, or descendant of a victim, of Nazi persecution from consideration for eligibility under the public aid provision. The bill passed unanimously and took effect when Gov. George H. Ryan signed it Dec. 23.

"There is no amount of money and there are no words that can undo the suffering of victims of the Holocaust, but nevertheless, we should not add insult to injury by diminishing their reparations through taxation," Ryan said. "Through this bill, the state is making the added gesture of excluding income of those victims from consideration for eligibility under the provisions of public aid so that the income of senior or disabled persons receiving state assistance are not adversely affected."

Rep. Jeff Schoenberg, D-Evanston, introduced this legislation to extend the reparation exemptions of Holocaust survivors from any country or government. Previous Illinois law followed the federal tax exclusion for income reparation payments paid by the German government to victims of the Nazi regime.

New Jersey considers gas tax hike
TRENTON -- Despite an overflowing state treasury, New Jersey officials are considering an increase in the state's gasoline tax.

Gov. Christine Todd Whitman and Jack Collins, speaker of the Assembly, say that raising the 10.5-cent-per-gallon gas tax may be necessary to pay for needed repairs to the state's schools and transportation systems.

The rebuilding of New Jersey's many aging schools could cost as much as $10 billion, officials say. On top of that, the Transportation Trust Fund, which was established 15 years ago to finance construction of roads and bridges, is now essentially broke after relying heavily for decades on borrowing to pay for road costs.

The tax increase may be required because much of New Jersey's record fiscal surplus of $782 million is already committed. The state also will get an additional $7 billion, to be paid over 24 years, from the tobacco lawsuit settlement.

Gov. Whitman has pledged to use most of the tobacco settlement money for health care and has proposed a $100 million plan to help provide insurance to 125,000 low- and moderate-income families. A property tax rebate program enacted last year will return $200 million more to taxpayers.

Collins said recently he saw few fiscally responsible alternatives to a gas tax increase, adding that about a third of the gasoline sold in New Jersey is bought by nonresidents. The governor, whose attempt to increase the gas tax in 1998 was rejected by the Legislature, said she might support an increase this time if the legislators proposed it.

New York tobacco money for health care
ALBANY -- Smoking in New York is about to get more expensive.

A new tobacco tax, worked out by Gov. George Pataki and legislative leaders on Dec. 17, would bring the total tax on a pack to $1.11, the highest of any state. Legislation incorporating the tax agreement is expected shortly and passage is considered certain.

Money raised by the cigarette tax would help pay for the continued operation of a state program that pays hospitals to train new doctors and treat uninsured people who show up in emergency rooms. The program had been due to expire at the end of the year.

Indianans may get a respite from property taxes
INDIANAPOLIS -- Indiana Gov. Frank O'Bannon wants state lawmakers to postpone changing Hoosiers' property tax bills when the legislature meets on Jan. 10.

O'Bannon is proposing a two-year delay in property reassessments, which are scheduled to begin in early 2000. Residential, business and farm properties would be affected. In addition to the postponement, the governor also is proposing a package of property tax reforms.

The proposals are prompted primarily by the Indiana Supreme Court ruling that current tax assessments are not fair. The State Board of Tax Commissioners devised new rules to satisfy the court, but the governor rejected the tax board's plan, saying it would increase property taxes in many areas and shift most of the burden to homeowners.

If the Indiana General Assembly adopts the delay, property reassessments would begin July 1, 2001, and be completed by March 1, 2003. Property taxpayers would feel the impact of the new assessments in 2004.

In addition, O'Bannon is seeking a shift of welfare program funding from the county to the state level. Currently, the Family and Children's Fund is financed by local property taxes. Moving this cost to the state level would minimize the impact of the reassessment, according to the governor's office.

Lawmakers of both political parties said they are open to the governor's two-year delay in property tax reassessment, but are skeptical of the broader tax changes in his plan.

New Texas tax credit
AUSTIN -- Any Texas business that commits resources to specific school programs will get a tax credit from the state.

Beginning Jan. 1, corporations that provide support for before-, after- and summer-school programs in their communities could get a credit of up to 30 percent of what they spend on the programs. Qualifying expenses include construction, renovation or remodeling of a facility or structure to be used by the school, purchase of necessary equipment, supplies or food used in the program, and administrative operating costs.

Texas Lieutenant Governor Rick Perry said the tax credit should be an incentive for businesses to increase their community involvement by providing children with new learning, mentoring and athletic opportunities.

Companies that would like tax credit details may contact Berkley Dyer in the lieutenant governor's office at 512-463-0406, by email or by mail at P.O. Box 12068, Austin, TX 78711-2068.

Wyoming fuel and sales tax changes proposed
CHEYENNE -- Gov. Jim Geringer's preliminary 2000-2002 budget includes a phased-in 5-cent increase in Wyoming's fuel tax and recommends that the sales tax exemptions for services be removed.

In addition to those tax increases, the governor's budget calls for a phase-out and eventual elimination of the state sales tax on food.

"The purpose of broadening the sales tax has to do with where the economy is going," the governor said, noting that Wyoming has not taxed services in the past, although the service portion of the state economy is growing.

Wyoming faces a projected budget shortfall of between $127 million and $183 million for the coming budget cycle. Under the governor's plan, the fuel tax increase of 5 cents would raise the tax to 19 cents over two years and raise an additional $45 million for the state. By broadening the tax base through elimination of exemptions and eventually removing the food tax, state money would be increased by a net of $28 million, Geringer said.

States look to tax incentives for health coverage
WASHINGTON, D.C. -- With long-term care insurance becoming a major voter concern, more than half of the states plan to consider tax credits or deductions to encourage the purchase of such policies. And nearly another quarter plan to use tax incentives to promote general health insurance coverage.

The National Conference of State Legislatures surveyed state legislative health committees about what action is being considered for the 2000 session on myriad health care programs. Conducted between Thanksgiving and Dec. 10, responses came in from 48 states, including some that will not hold legislative sessions next year.

The study revealed that a number of states are considering tax credits or deductions to encourage small employers to provide health coverage for employees. Other states are considering similar methods to more widely extend long-term care insurance coverage. Still others will consider whether to provide tax credits or deductions for individuals paying for their own insurance.

States where legislators are considering tax credits or deductions for both health and long-term care insurance are California, Connecticut, Delaware, Kentucky, Michigan, Mississippi, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Dakota, Virginia and Wisconsin.

States considering tax methods to promote only health care coverage are Arizona, Colorado, Florida, Georgia, Missouri and Tennessee.

Tax breaks to promote long-term care coverage only are being considered by Hawaii, Iowa, Maine, Massachusetts, Minnesota, New Hampshire, South Carolina and Washington.

Connecticut also is considering medical savings accounts, and Minnesota is considering tax credits for farmers to promote health insurance coverage. Indiana is considering whether to provide long-term care insurance to state employees.

States not mentioned either did not respond or did not include any tax-related measures on their health-care legislative agendas.