Federal Tax Increases Said To Cost States Billions

March 15, 1989 1 min read

Washington--Increases in federal excise taxes five years ago have cost state governments $3.7 billion in revenue, according to a new study by the National Conference of State Legislatures.

The study, which was released during an ncsl meeting here last week, said losses are expected to grow by another $3.5 billion by 1992, for a total nine-year loss to states of $7.2 billion.

The report said that federal tax increases imposed on alcohol, gasoline, and cigarettes in 1983 raised the price of those products, and thus lowered consumer demand for them. The decline in4sales, in turn, reduced revenues from the states’ own excise taxes on the items.

State taxes on gasoline, cigarettes, and alcohol generate approximately $25.4 billion a year. The study noted that five states earmark their cigarette taxes and six states designate their alcohol taxes for education.

“Increased federal excise taxes represent an encroachment on a traditional source of state revenue,” said Samuel B. Nunez Jr., president pro tem of the Louisiana Senate and president of the ncsl

Mr. Nunez said state legislators support attempts to decrease the federal deficit. But, he added, increases in federal excises taxes only shift the deficit burden to the states.

Although President Bush has vowed to oppose any tax increase, Congressional leaders have raised the idea of increasing the federal gasoline tax as a means of reducing the deficit.

The ncsl report said that such a policy “would have a significant adverse impact on state tax revenue and consequently on the services provided by state governments.”


A version of this article appeared in the March 15, 1989 edition of Education Week as Federal Tax Increases Said To Cost States Billions