Tax increases tell the story: the recession has ended.

• Author: Mackey, Scott

Last year was another quiet year on state tax front. Lawmakers collectively increased taxes by $4.1 billion (1.3 percent), only slightly above the 1.2 percent increase in 1992. These minor increases in 1992 and 1993 sessions follow the two large increases adopted in 1990 and 1991 when the recession took its toll on state finances.

The two traditional workhorses in state finance--sales and income taxes--will raise $2.5 billion of the $4.1 billion increase. Legislators disproportionately targeted cigarette and tobacco taxes for hikes. Although cigarette taxes raise just 2 percent of state revenues, the $625 million increase represents 15 percent of the total FY 1994 increase. Health-care tax increases, on the other hand, slowed substantially between FY 1993 and FY 1994. New health-care taxes will raise $200 million this year compared to $1.8 billion in FY 1993. New federal restrictions on provider taxes contributed significantly to this decline.

Four of the six New England states raised taxes, reflecting the region's slow recovery from the recession. Wyoming and Montana also had large increases; their economies have been hurt by problems in natural resource industries. Southeastern states and the nation's midsection had the fewest tax hikes.

Looking only at tax increases can be deceptive, however, since economic performance dictates how full state coffers are getting from existing taxes. From 1984 through 1989, revenues grew by almost 9 percent annually even though tax increases averaged only 1.3 percent. From 1990 through 1992, revenues grew by just 4.9 percent annually even though...