(MONEY Magazine) – Last April, a new job enabled Leland and Kathy Rhodes to flee the gathering gloom of tax hell in California for the pristine uplands of tax heaven in Wyoming. Today, as the $60,000-a-year chief financial officer of Defense Technology in Casper, Leland, 35, earns 7% more than he did back in San Diego. He luxuriates with his wife Kathy, 33, a homemaker, and daughter Shea, 3, in a $158,000, 4,400-square-foot house on half an acre in the foothills of the Rockies -- three times the size of their former home, a $186,000 townhouse. Yet the Rhodeses now pay $3,000 less in combined state and property taxes than they did in California. ''Because of the savings, we have options we didn't even consider before,'' says Leland. Best of all: ''We can afford a larger family.'' Many irate taxpayers are contemplating doing just what the Rhodeses did -- fleeing a fast-moving blizzard of state and local tax increases, combined with deep cuts in public services. As the table on page 72 shows, 28% of MONEY subscribers told Gallup Organization pollsters that they have moved or considered moving to another state because of high taxes. Similarly, taxes caused 23% to relocate in another city or think about doing so. Such a sentiment would have been unlikely even 10 years ago. But Americans are waking up to a new and chilling truth about taxes. ''Although your federal taxes are still larger, state and local taxes pose a far greater threat,'' says Hal Hovey, editor of State Budget & Tax News, an Alexandria, Va. newsletter that monitors the 50 states' finances. ''They are much more likely to rise each year.'' The big bad-news numbers: For fiscal 1992, 36 states enacted an unprecedented combined tax hike of $16.2 billion, or 5.4% of their $300 billion in tax collections. California, for instance, added $7.3 billion of new taxes to help balance a $46 billion budget. (For MONEY's ranking of the tax burden in the 50 states and the District of Columbia, see the table on pages 74 and 75.) The same states also raised another $3.2 billion by accelerating collections (they simply changed tax-due dates) and by boosting user fees (a euphemism for taxes on such items as driver's licenses and phone calls). And, according to a survey by the U.S. Conference of Mayors, three out of four cities increased taxes in '91. The hikes in taxes and cuts in services are bringing more and more Americans real pain. Inevitably there are financial trade-offs like cutting family budgets and omitting vacations. If you are wise, however, you will be looking to more calculated defensive actions. Be warned that there are few of them compared with the battery of federal tax cutters available to you. (For four basic ways to trim your state taxes, see the facing page.) Three illustrative tales: -- Richard Turbin, 46, and his wife Rai, 44, of Honolulu pay 45% of their + $200,000 income in combined federal, state and local taxes. ''Hawaii may be a tropical paradise, but it's a tax hell for residents,'' says Turbin, who has joined a local tax protest group. A prime target: the state income tax, whose top rate is 10% on taxable income above $41,000 -- the fourth highest after North Dakota's 12%.

-- Marijcke Clapp, 52, has seen taxes on her $635,000 Seattle house jump from $2,000 in 1985 to $7,000 in 1991 and worries that they could reach $13,000 in 1993. She has protested by organizing the Committee for Fair Property Tax Assessment to get Initiative 559 -- a measure that would place a 4% cap on annual real estate tax increases -- on the ballot. The effort failed this time around, but she vows to try again next year. -- Linda Coco, 23, an anthropology major at the University of California at Berkeley, watched incredulously as her tuition and fees doubled since 1989, from $1,334 to $2,678, thanks to state budget cuts. And the university has canceled several of the courses she had planned to take as part of her major. Even student parking at $214 a year costs 7% more than last year. Says Coco: ''I'm getting a lot less education for a lot more money.'' One reason for the tax hikes is the stalled economy. ''The states will continue to be in a bind because of the slow recovery, which reduces tax revenues,'' says Steven Gold, an expert on state tax and the director of the Center for the Study of the States at the Rockefeller Institute in Albany, N.Y. ''That means you'll see your taxes rise -- even if you live in a low-tax state.'' The far bigger reasons for the black-hole tax hikes are the noncyclical, structural problems that no politician seems capable of solving. Through the boom times of the '80s, the states' coffers swelled with revenues and spending increased by 33%, after inflation. During that decade, the federal government trimmed aid to the states by 50%, or $60 billion. But as the recession reduced revenues, the states' costs of federally mandated programs continued to shoot up; state spending on Medicaid, for example, jumped by 71% -- corrected for inflation -- to $31.6 billion. Indeed, Medicaid costs are growing 23% annually, a rate that outpaces all other state spending categories. Another example of inescapably rising costs: public education, which claims 30% of state revenues on average. With the population of school-age children growing 1% or more annually, schools are expected to need increases of at least that magnitude during the '90s, compared with the 3% annual increases they got in the '80s. Prison costs, which grew 17.6% last year, are the third big state budget buster. Analysts expect that the cost of maintaining statewide prison systems will rise an average of 11% a year through the decade. All of these factors have made the budget-balancing process immensely tougher than ever before. Nine states -- California, Connecticut, Illinois, Louisiana, Maine, Massachusetts, North Carolina, Ohio and Pennsylvania -- entered their current fiscal years adopting late budgets because governors and legislators fought over the tax-or-cut choices they had to make. If the states could meet this oncoming tide with budgets balanced, perhaps there would be a fighting chance of riding it out by trimming expenses and streamlining management. But half the states are already crippled: 25 of them and the District of Columbia face revenue shortfalls in excess of $100 million for fiscal 1992, which ends on June 30 in most states. And 20 states have already overspent for Medicaid through mid-'92. State lawmakers have only two options: tax or cut. Since they're politicians, they're doing both -- but in ways they hope will least harm them at the polls. Given the temper of taxpayers, most state legislatures are reluctant to enact new taxes or hike old ones. Right now New Jersey's chastened Democratic Governor Jim Florio must contend with a newly elected Republican majority in the legislature, because of the voter rebellion over the $2.8 billion tax package he rushed into law in 1990. Even his own party has proposed repeal of Florio's tax package. In Connecticut, Independent Governor Lowell Weicker faced a string of angry protests -- including one in which 65,000 taxpayers stormed the capitol -- for having pushed through that state's first income tax in August. Steven Gold predicts that by the end of the decade, another four of the nine states that still have no income taxes -- New Hampshire, South Dakota, Tennessee and Texas -- will have to enact them ''to fund basic services as other revenues, such as sales taxes and user fees, dwindle.'' In the meantime, most states are increasing their tax take in two ways. First, they are spawning a host of gnatlike taxes that sting individually but do real damage collectively. Some recent examples: Maine sales tax, up from 5% to 6%; Ohio sales tax, base broadened to include landscaping and 900 numbers; Arkansas gas tax, up 5 cents a gallon to 18 1/2 cents; Pennsylvania cigarette tax, up 13 cents a pack to 31 cents; New Mexico tax exemptions, eliminated for all out-of-state municipal bond income; Oregon fee to process birth certificates, up 300% to $13. ''Taxpayers increasingly are going to feel such nuisance taxes in their household budgets,'' says Gerald Scully, an economist at the University of Texas at Dallas. Second, many states are making their income taxes more progressive and socking it to the taxpayers at the upper reaches of the salary scale, generally the top 12% of households -- those earning above $75,000. Of the 11 states that raised income taxes in 1991, only Pennsylvania and Rhode Island hiked their rates uniformly at all levels. Maine added a new rate of 8.6% for incomes above $75,000 for joint filers (formerly 8.5% was the top rate for incomes above $32,000). State officials also imposed a temporary surcharge of 5% of tax on incomes up to $75,000 and 15% above $75,000. North Carolina increased its top rate from 7% to 7.75% for joint filers who earn at least $100,000 annually. In California, the top rate used to be 9.3% for married couples with incomes starting at $52,761. Two new rates were added: 10% for wages over $200,000 and 11% on everything above $400,000. Minnesota imposed a new 8.5% rate for household incomes above $79,120 a year. New York has targeted six-figure-income families for increases without boosting rates. The state made those who earn $100,000 or more pay all their tax in the highest -- 7.875% -- bracket, while others can still pay 4% on the first $11,000 and 5% on the next $20,000. Says Steven Gold of the controversial measure: ''There are 22 states, including Alabama and Georgia, that are ripe for progressive tax rates. They either have flat tax rates or the top rate applies to joint filers earning less than $30,000. I see more states starting to adopt these taxes as early as 1993.'' And in many localities, what you get for your higher taxes is less service. According to the National Governors Association, 29 states made $7.5 billion in service cuts last year, equal to 10% of their spending. For example, Massachusetts and Florida each reduced their budgets by 8%, $850 million and $784 million, respectively. ''The states will have to cut an additional $8 billion in 1992, and that will mean higher tuition at universities, fewer state troopers and shutdowns of everything from health facilities to recreational areas,'' says Raymond Scheppach, the association's executive director. ''This is not a cyclical trend that will end with an economic upturn.'' Some of the bitterest service cuts for middle-income families are taking place in higher education. For example, Democratic Governor William Schaefer has imposed $115 million in program cuts on the University of Maryland over the past two years, including a 20% reduction in the school's personnel, course offerings and student services, plus a temporary surcharge of more than 15% on next year's tuition, boosting it to $2,718 for state residents at the College Park campus. And California, which hiked in-state tuition in a range from 20% to 40%, may be forced to reduce its higher-education subsidy, now covering up to 90% of the cost of education per student, to about 80% by 1995. The result: another tuition increase of as much as 40% by this spring. Other states such as New York and Massachusetts are feeling intense pressures to cut programs and raise tuitions. Outlook: the traditional gap between public and private college costs will substantially narrow. What, then, will 1992 bring? If you live in a state that either increased taxes or developed new ones in 1991, you probably don't have to worry about a new round of levies for a year or so, particularly since 1992 is an election year for many state offices as well as for the Presidency. But the upward push won't diminish. Here are short takes on the 11 states that tax experts rate a D in MONEY's 50-state ranking on page 74. The grade marks a state as being among the most financially weak and therefore likely to hike taxes in the next two years. -- Colorado. A $53 million spending overrun in Medicaid will open a fiscal hole of roughly $100 million for 1992. To balance 1991's $2.7 billion budget, officials sliced away $55 million -- 0.5% of current spending -- in services and staff. But a $130 million mandated school spending increase for 1993 could open another gap that might be closed only with more taxes. -- Florida. Democratic Governor Lawton Chiles cut $600 million from the $11 billion in proposed spending. Expected to help plug any '93 deficit: a corporate value-added tax. -- Georgia. Democratic Governor Zell Miller is wrestling with a $385 million deficit in a $13 billion budget, largely because of increases in welfare spending of 10% or more. With no major tax hikes since 1990 and collections down $50 million, new sales and income taxes seem a sure thing in '92. -- Illinois. To close a $1 billion gap in the $23 billion budget, brought on in part by Medicaid cost overruns, the state has extended a 0.5% income tax surcharge. Continuing Medicaid cost drains could force new taxes in 1993. -- Indiana. This year's $6 billion budget was met with such one-time devices as temporary suspension of the tax credit for auto excise taxes, which generate only $80 million in revenues this year. More trouble meeting Medicaid costs next year makes higher sales and income taxes likely by 1993. -- Kansas. By underestimating the cost of Medicaid, state officials overspent the $5 billion budget by more than $200 million last year. Democratic Governor Joan Finney vetoed a $138 million tax package and promised to reduce high property taxes. A major political battle looms as lawmakers begin pushing for new sales and income taxes by fiscal 1993. -- Maryland. Governor William Schaefer cut $660 million from the $6.3 billion budget in 1991. Revenues, however, are expected to fall $650 million short this year. Proposed cuts total $450 million for items including aid to local governments, some welfare programs and the abolition of 700 of the state's 70,000 public jobs. Higher sales and excise taxes on cigarettes and gasoline may be inevitable in 1992. -- New Hampshire. This state's low-tax halo is slipping badly. Rocked by its worst recession since the '30s, it projects a $40 million drop in revenues for fiscal 1992. The legislature passed a 3.5% across-the-board cut in the $708 million budget in November. But Medicaid spending in 1993 could push the gap for that year to $100 million. State tax experts Steven Gold and Hal Hovey both expect a major drive for an income tax by 1993. -- New York. The highest state taxes of all still can't keep Democratic Governor Mario Cuomo's $30.7 billion budget from running as much as $875 million in the red. Chief reasons: $311 million in personal income taxes less than expected and a $231 million Medicaid overrun, the largest in the country. Right now the state is projecting a deficit of $3.6 billion for next year, making tax increases virtually certain in 1993. Prognosis: corporate sales tax increases this year. -- Ohio. Revenue collections are running $60 million to $80 million short in a $10 billion budget. Expect sizable budget cuts. First up: more than 1,000 of the state's 65,000 employees. Look for a hike in the sales tax, from 5% to 6%, and new user fees in 1992. -- Rhode Island. Last year, the government shut down for three days because it couldn't pay employees. It increased sales taxes last year from 6% to 7%, but the extra $120 million in revenue still left the till $52 million short in a $1.47 billion budget. New user fees expected in '93 will be little and late. Spiraling welfare and Medicaid costs alone could force drastic cuts in state welfare programs as early as April. While it does not rate a D this year, California, the nation's most populous state, is clearly headed for one by 1994. The reason: Republican Governor Pete Wilson's $7.3 billion tax package is simply no match for the projected $14.3 billion budget gap. By July the shortfall will still be $2 billion to $3 billion, in part because of enormous Medicaid costs. The most immediate remedy will be cuts in personnel and services of 5% or more. Tax hikes may resume in 1993 or 1994. As the national economy remains sluggish, California will be far from the only state bound for fiscal wars in the 1990s. As it does in so many other ways, the Golden State may set the pattern for the nation.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: WOULD YOU MOVE TO SAVE ON TAXES? The most startling finding in MONEY's Americans and Their Money poll conducted by Gallup: the growing willingness to consider fleeing to another state or city to escape high taxes.