Why Governors Are Squawking

NEW JERSEY

Raised state income and sales taxes $2.8 billion

Democratic Governor Jim Florio already has a taxpayer revolt on his hands. More than 500,000 voters have signed a petition calling for a rollback of the hikes imposed in June, and IMPEACH FLORIO bumper stickers are sprouting. Limiting federal deductions for state levies to $10,000 a year would hit more than 48,000 residents with an average $5,400 in additional taxes and could further undermine Florio's progressive tax reforms.

CALIFORNIA

Adopted a budget-balancing plan that includes $843 million in new taxes

Late last month Republican Governor George Deukmejian and the Democratic- controlled legislature reached a compromise that balances the state's $55 billion budget by reducing social spending $2.3 billion. Limiting state and local tax deductions to $10,000 would affect only 224,000 people, most of whom earn more than $200,000. But it could derail a movement by Democratic legislators to raise $2 billion by increasing the top income tax rate.

MASSACHUSETTS

Passed a $1.2 billion increase in state sales taxes

Only a week after Governor Michael Dukakis signed a law extending the 5% sales tax to 594 service industries, legislators tried to rescind it. To make up for a resulting shortfall of over $250 million in the $13.4 billion budget, a 4% cut in most government services was put into effect. Although only 1.5% of taxpayers would be affected by limiting federal deductions to $10,000, it would devastate a state struggling with its largest tax hike ever.