Surprise! Some taxes go up.

This is the era of the tax cut. Federal rates have been reduced. Throw in state and local levies and the combined revenues raised by governments last year shrank to a smaller share of the economy than at any time since 1968.

So this news flash may come as a shock: Millions of American individuals and businesses face tax hikes this year. These extra taxes and fees, some at the state and local levels, will shrink or even possibly wipe out the savings that some taxpayers would otherwise see on their federal 1040.

Here's a rundown of some of the less-noticed tax hikes:

Social Security taxes: About 9.2 million of the estimated 156 million workers who pay this tax will pay higher taxes in 2004 - the result of an increase in the taxable maximum amount subject to that tax. Reflecting an increase in average wages, the taxable maximum has risen from $87,000 in 2003 to $87,900 this year. Those with earnings of $87,900 or more will pay up to an additional $58.80. So will their employers.

Alternative minimum tax: An additional 800,000 taxpayers, reaching a total of 3.2 million, will be subject this year to the AMT, according to the Tax Policy Center in Washington. As a result, federal AMT revenues will rise to $18 billion from $15.9 billion in 2003.

The AMT operates parallel to the regular income tax, with different rates and definitions of income and deductions. When first devised in 1970, it was intended to ensure that all high-income households paid income taxes, even if they qualified for loopholes. The AMT rate reaches 35 percent of income.

But because the AMT is not indexed to inflation and the 2001 tax cut, more and more middle- income taxpayers are made subject to the AMT.

"It's a time bomb," says David Bradley, an analyst at the Center on Budget and Policy Priorities (CBPP), a Washington think tank.

Unless current law is changed, 33 million taxpayers - most in the upper middle-income level - will face a much bigger tax bill by 2010. Considering the political implications, the White House and Congress are expected to soften that extra tax blow next year, at least temporarily.

Income-tax bracket creep: As some taxpayers enjoy real gains in their income, many will pay not only more taxes, but a higher proportion of their income in taxes. This is because the tax system is nominally progressive - with tax brackets of 10, 15, 25, 28, 33, and 35 percent - so the more you earn, the higher the tax bracket you're in.

This phenomenon isn't new, of course. And compared with the '70s, the system is less progressive, so the jumps to higher brackets aren't as dramatic. Still, with tax brackets indexed to inflation and the inflation rate so low, a significant income boost can more easily push individuals into the next bracket or more of their income into that higher bracket, increasing their tax burden.

State and local taxes: In some cases, the cuts in federal taxes and programs have shoved some of the tax burden down to states and municipalities. True, housing values have risen in most areas, resulting in higher property taxes. But many cities and municipalities have also suffered cuts in state aid. So they have also hiked property taxes, hitting millions of homeowners, to pay for schools and other services.

Robert Zahradnik, a CBPP analyst, says federal tax changes such as cutting estate taxes and other policies will cost states $185 billion between 2002 and 2005. Congress did provide $20 billion in fiscal relief to the states. But many states, also hit by a weak economy, are struggling. Their combined deficits exceeded $100 billion between 2001 and 2003.

Faced with the need to balance budgets, 36 states enacted tax and fee increases for fiscal 2004, which ends next June 30, notes the National Association of State Budget Officers. These are expected to bring in $9.6 billion. Other measures, such as ending tax amnesty programs and accelerating payment of sales taxes, are aimed at raising another $3 billion.

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