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Sales, gas and cigarette taxes up

By Kay Bell ·
Thursday, August 12, 2010
Posted: 2 pm ET

Most of the recent tax attention has focused on the possible expiration of the Bush-era federal tax cuts. That's given states a chance to slide in under the radar and hike numerous consumer taxes.

Levies on retail purchases, gas and cigarettes have continued to climb, according to data compiled by the tax information and software company CCH. "From the increases in consumer taxes, it's evident that many states are trying to shore up revenue shortfalls," says CCH Senior State Tax Analyst Daniel Schibley.

And even in the few locales that haven't hiked at least a few taxes, don't be surprised when they finally get around to doing so.

This year, CCH analysts found five states increased their tax on gasoline, five states increased their sales tax and 11 states increased their tax on cigarettes. The District of Columbia also increased its taxes across all three consumer tax categories, joining North Carolina, which is the only state to also hike taxes in all three areas.

Sales tax hikes: The states that decided over the last year that it was necessary to raise sales tax rates are Arizona, Kansas, Massachusetts, New Mexico and North Carolina. Washington, D.C. also increased its sales tax.

CCH found sales tax increases from incremental in New Mexico, where the tax went from 5 percent to 5.125 percent, to yikes in Massachusetts, where the rate increased from 5 percent to 6.25 percent over the past year.

Overall, 25 states and the District of Columbia now impose a sales tax of 6 percent or more.

And remember, that's just at the state level. Cities, counties and special taxing jurisdictions usually get a few (or more) pennies when you buy taxable items.

Gas prices down, taxes up: The price of gas has headed downward recently, but fuel taxes have gone up in five states. Drivers now pay more at the pump in California, Kentucky, Minnesota, Nebraska, North Dakota and the District of Columbia.

The gas-tax rate has increased incrementally in some states, such as Minnesota where it went from 27.1 cents to 27.5 cents per gallon. In California, however, the gas tax nearly doubled in the past year, from 18 cents to 35.3 cents per gallon.

As with sales taxes, other add-ons mean even higher fuel prices, notes CCH. Taxes and fees related to environmental impact, licenses and inspections may also be passed through at the pump to consumers in a number of states.

Cigarette taxes: Sin taxes have always been popular, and among the biggest sins in lawmakers' eyes is smoking.

Over the past year, CCH found 10 states added to their cigarette taxes: Connecticut, Delaware, Hawaii, New Mexico, New York, North Carolina, Pennsylvania, South Carolina, Washington and Wisconsin. The District of Columbia also increased its cigarette tax.

You know times are tough when a state that traditionally relied on tobacco farming, South Carolina, increases its cigarette tax from 7 cents per pack, the lowest in the nation, to 57 cents.

The biggest tax attack on smoking came in New York, where the tax is now $4.35 per pack, up from $2.75 last year. Given additional New York City cigarette taxes, smokers in the Big Apple could be paying close to $10 per pack.

Have you noticed similar consumer tax increases in your state? Have the hikes changed your lifestyle, such as driving less, buying a fuel-efficient car or giving up smoking?

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