Does This Sound Familiar?

Budget-strapped states avoid the word 'taxes'..
Increases disguised as "penalties," "fees."

Faced with severe budget shortfalls after a steep economic recession, state legislatures and governors are trying to raise money without raising taxes — at least not technically.

A fee hike, an increased penalty or fine, the elimination of a tax exemption — none of these technically counts as a tax increase, as far as many state lawmakers are concerned. Fiscal conservatives argue that a tax hikes are exactly what they are, but their arguments are likely to fall on deaf ears for legislators and governors wrestling with some of the worst budget deficits since the Great Depression.

"There's a certain American antipathy to raising taxes, so even if these are tax increases, there's an incentive to call them something else," said Joseph Henchman, director of state projects at the conservative Tax Foundation. "It's a trend we always see, but it's certainly going to be one that's stronger this year."

The National Conference of State Legislatures found that 35 states and Puerto Rico are facing deficits for fiscal 2011, despite the Obama administration's $787 billion recovery package, which pumped tens of billions of dollars into state coffers last year.

A report issued in December by the National Association of State Budget Officers (NASBO) and the National Governors Association found that states raised taxes and fees by $23.9 billion in fiscal 2010, nearly tripling the $8.1 billion in such increases implemented the previous year. More increases are likely in the coming year, although they probably won't match last year's total, said Scott Pattison, NASBO's executive director.

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