Nickel and Diming: States Raise Fees As Alternative to Tax Hikes
NARRAGANSETT, R.I. (AP) - Twenty dollars for a parking place wasn't going to ruin Ellen Majka's day at the beach. But she was still taken aback when she arrived at Rhode Island's popular Scarborough state beach and learned that parking fees had nearly doubled.
"It seems a little steep to me," said Majka, of Westfield, Mass. "Add in the price of gas and it starts to add up. But I didn't come two hours to turn back over $20."
As states and municipalities continue to grapple with the recession's fallout, few turned to big, noticeable tax hikes this year. Instead, they're slashing spending and turning to more modest, narrowly crafted increases in fees and fines -- nickel-and-diming their way to a balanced budget.
Louisiana and South Dakota raised state park fees, while California increased vehicle registration costs and Wisconsin started charging more to retake the state driving exam. Georgia raised fees on day care licenses, fireworks permits and traveling circuses. Oregon raised fees on medical marijuana, while Rhode Island imposed taxes on over-the-counter drugs, sightseeing tours and smartphone applications.
Fines are going up in many places too. Tennessee lawmakers increased traffic fines. Wyoming raised fines for trucks exceeding weight limits. New York city increased fines for taxi drivers caught talking on a cellphone while driving.
In Maryland, fee increases were common solutions this year as lawmakers struggled to balance the books without across-the-board tax increases.
Not even newborns went unaffected, as birth certificate fees doubled from $12. The fee for a vanity license plate doubled from $25. A surcharge on filing land records will double from $20.
Kim Malle, who lives on Maryland's Eastern Shore, isn't only unhappy about the recently approved fees; she's also concerned about rising tolls that are under consideration. The Grasonville resident may have to pay more to take the Bay Bridge across the Chesapeake Bay when the toll rises from $2.50 to $5 on Oct. 1 and up to $8 by 2013.
"I think this state has too many fees, definitely," Malle said after walking out of a Motor Vehicle Administration Office, where she was returning tags for a vehicle that she had sold. "I don't mind certain things, but I just think the state overdoes it."
Julio Reyes, who was at the same office to pay the certificate of title fee, said the recent jump from $50 to $100 to title a new car was too much, too fast.
"I think maybe $20 more; that's OK," Reyes said. "100 percent? Too much."
Fee increases can be an attractive alternative for lawmakers worried about losing political points or increasing hardships by raising income or sales taxes across the board.
Professional license fees are a cost of doing business. Recreational fees are paid only by users. Don't want to pay a tax on a new smartphone app? Don't download it.
"The folks who run government weren't born yesterday," said Larry Gerston, a political science professor at San Jose State University. "When they see a fee that has a built-in user base, in times of difficulty they'll do whatever they can to extract revenue from that base. Raising fees is often easier than raising taxes. They can avoid the controversy and the public backlash."
Or, as Maryland Democratic state Sen. Richard Madaleno of Montgomery puts it: "Politically, it does appear that fees are certainly something that are more feasible -- no pun intended."
But some lawmakers are tiring of the practice of using fees to avoid the dreaded T-word. Texas state Rep. Richard Pena Raymond proposed a bill this year that would require lawmakers to officially label any proposed fee increase a tax increase.
"They say, `Look, it's not a tax, it's a user fee,'" said Raymond, a Laredo Democrat. "I say that's bull. The public is cynical already. We have to be honest and call it what it is: a tax."
Only two states opted for across-the-board tax increases this year to resolve budget deficits, according to Susan Urahn, managing director of the Pew Center on the States.
Illinois lawmakers passed a 67 percent across-the-board income tax increase, while Connecticut legislators voted to raise the state's sales tax rate from 6 percent to 6.35 percent and impose it on new services including manicures, pet grooming and yoga classes.
For the majority of states, spending cuts and focused fine and fee increases were the preferred approach.
States aren't alone in raising fees. Colleges and universities have increased fees -- and tuition -- to make up for funding cuts. Cities, too, are getting into the game.
On Tybee Island, Ga., beach tourists are shelling out about $870,000 a year more for parking meters and tickets than they did just four years ago. After a series of increases to hourly rates and fines, parking now competes neck-and-neck with property taxes as the island city's top source of revenue. Meters and parking are projected to raise $2.15 million a year for the island city; property taxes revenues are projected to raise $2.16 million.
"It seems like everywhere they can find a place, they want to stick a meter. They're hungry for revenue," said Doug Hall, who's been told by city officials they're looking to convert eight free parking spots to metered spaces in front of the small shopping center he owns.
Providence, R.I., recently enacted a fee for disposing of a mattress. Philadelphia hiked parking meter fees as part of an aid package for schools, which were facing a shortfall created in part by cuts in state aid. Greensboro, N.C., doubled fines for parking in a fire lane from $25.
Lawmakers say the new fees and fines are just keeping up with the times. Rhode Island, a summer playground for many in the Northeast, last raised its beach fees in 2002. Smartphone applications didn't even exist when lawmakers imposed the sales tax on the purchase of software at a retail computer store.
Rhode Island lawmakers said they only endorsed fee increases after exhausting the list of state services or programs that could be cut. They say a bigger, across-the-board income or sales tax increase would have been a far greater burden on taxpayers: the fee and tax increases will only raise $20 million in new revenue for a state budget of $7.7 billion. Earlier in the year, lawmakers balked at an ambitious call by independent Gov. Lincoln Chafee to expand the sales tax to raise $165 million.
Critics of fee increases say lawmakers who favor them often believe taxpayers won't notice a small fee increase. Rhode Island state Rep. Robert Watson disputes that, saying consumers often will change their behavior to avoid higher fees.
"I think people make decisions based on being nickeled and dimed," said Watson, an East Greenwich Republican. "People will drive across town to save a dollar. I absolutely think people might decide to go to a certain beach because the fee is lower."
Some disgruntled fee-payers are considering even bigger moves.
Tom Tompkins was blunt when asked about the fee increases while walking out of a motor vehicle office in Annapolis, Md.
"I want to move to Delaware," said Tom Tompkins, 63, of Glen Burnie, Md. Tompkins, who is retired, cited an increase in Maryland's sales tax rate from 5 to 6 percent, approved in 2007. The lifelong Maryland resident said Delaware, which has no sales tax, looks more inviting all the time.
"It's more than annoying," Tompkins said of his state's new taxes and fees. "I mean, if you figure that you pay state income taxes and then you have all these fees and taxes on top of what you have left after you pay state and federal income tax, it's pretty substantial, and I'm very serious about relocating to a state that's more tax friendly."
Witte reported from Annapolis, Md. Contributing to this report were Associated Press writers Jonathan Cooper in Salem, Ore.; Chet Brokaw in Pierre, S.D.; Julie Carr Smyth in Columbus, Ohio; Marc Levy in Harrisburg, Pa.; Melinda Deslatte in Baton Rouge, La.; and Russ Bynum in Savannah, Ga.