Most people (and tax experts) focus on the federal income tax, Social Security and Medicare taxes. This makes sense because they are the largest taxes most people pay. However, you should never ignore your state taxes.

Although state income tax rates are lower than federal tax rates, they can still add up. Moreover, unlike federal taxes — which are the same in every state — state taxes vary widely from state to state. For example, seven states don’t have any income taxes (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming).

State budgets have been hurting since the recession began in 2008. As a result, states have increased their taxes in recent years — they increased by $6.2 billion in 2011 alone.

However, the trend for 2012 has been to reduce state taxes in an effort to spur business growth. According to a report by the National Governors Association and National Association of State Budget Officers, states have put in place a net decrease of $584.2 million in new taxes and fees for 2012, which is the first decrease in five years.

The following states have made significant changes in their tax laws for 2012:

Connecticut: Starting in 2012, Connecticut will increase the number of income tax brackets from three to six, with the top income tax rate increased to 6.7 percent from 6.5 percent. Connecticut is also increasing the corporate income tax on large businesses from 8.25 percent to 9 percent. In addition, corporations will have to pay a surtax of 20 percent for the years 2012 and 2013.

Washington, D.C.: Washington, D.C., is increasing its sales tax to from 5.75 percent to 6 percent from Oct. 1, 2009, to Sept. 30, 2012. Food, prescription and nonprescription drugs, and residential utility services are exempt from the increase.

Indiana: Indiana is reducing its income tax rate from 8.5 percent to 6.5 percent. The reduction will be phased in gradually from 2012 through 2015.

Oregon: In 2009, Oregon increased taxes on "wealthy individuals" — defined as Oregon taxpayers with incomes above $125,000 — to 9 percent. However, starting in 2012, the top rate will be 9.9 percent on taxable income over $125,000.

Michigan: Starting in 2013, Michigan will cut its income tax rate slightly — the tax rate falls to 4.25 percent (it is currently 4.35 percent). However, Michigan has also repealed various exemptions, credits and deductions. The state also repealed its business tax and replaced it with a lower, 6 percent corporate income tax.

New York: New York state taxes have undergone a major restructuring. This includes new, lower income tax rates. Starting in 2012, the top rate for middle-income taxpayers (those with taxable income between $40,001 and $150,000) will fall from 6.85 percent to 6.45 percent.

There are cuts for taxpayers in other brackets as well. Even millionaires will benefit — those with taxable income over $1 million will see their state income taxes fall from 8.97 percent to 8.82 percent.

West Virginia: West Virginia’s corporate income tax rate will drop from 8.5 percent to 7.75 percent for 2012. The tax rate will continue to drop to a low of 6.5 percent in 2014 if certain revenue conditions are met.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors." He welcomes your questions for this weekly column.

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