economics

May 3, 2010

What’ll they tax next? Some states have already slapped taxes on blueberries, illegal drugs and fur clothing. But as budget shortfalls grow, state legislators are looking for even more creative ways to earn revenue.

Filed under: Uncategorized — ktetaichinh @ 4:28 am
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Your next trip to the barber could trim a little more than usual from your paycheck, depending on where you live.

In an attempt to balance their budgets, states like Michigan and Nebraska are considering making you take a haircut, by extending the state sales tax to include personal grooming services.

“These states are expanding the services they’re taxing, and a haircut is considered personal grooming and can be seen as a luxury item,” said Kim Rueben, a senior fellow at the Urban Institute. “And while you might not think a haircut is a luxury item, you could always do it cheaper or at home.” Pulling a tax out of a hat
Pulling a tax out of a hat
Angelique Steelgrave, performing a magic show with her husband, Markus.
Lawmakers in Maine are going after children’s entertainment to make a little extra money for the state.

A bill proposing a 5% state tax on a slew of things, including comedians, clowns, jugglers, ventriloquists, petting zoos, paintball and even haunted hay rides will be voted on this summer and would go into effect in January 2011.

“People make fun of the bill, saying we’re taxing clowns and that kind of thing, but that’s not the way to look at it,” said Maine House Majority Leader John Piotti. “It’s a comprehensive change and we’re doing it in a very smart way.”

But purveyors of such services are afraid their profits will disappear. Angelique Steelgrave, who works with her husband as a full-time magician, said that this tax will have a huge impact on small entertainment businesses like hers.

“We hate the idea,” she said. “Not a lot of businesses these days have the luxury of raising prices 5%, and in a lot of cases, this could be a serious amount of money we would either have to charge clients or eat ourselves.”
Up, up and away
Up, up and away
While you fly high, your bank balance may deflate with a new tax on already-pricy hot air balloon rides. At least in Kentucky.

The southern state is looking to raise $350 to $400 million a year by taxing high-end services such as limousine and hot air balloon rides, golf green fees, private landscaping, armored car services and professional laundry services.

“High income folks are not paying their fair share,” said Representative Jim Wayne, who helped to introduce the bill. “We’re looking to expand the sales tax onto services primarily being used by the wealthy — we did it deliberately so that the poor and middle income earners wouldn’t have an extra burden.”

But opponents of the bill are concerned it will stifle some small businesses.

“I know there’s very little I can do about it, but any tax is going to have a negative impact and I’m almost certain we will lose customers,” said Brian Beazly, owner of Louisville-based Balloon Odyssey, which offers rides ranging from $195 to $375.
Hair of the dog
Hair of the dog
A tax on pet grooming and horse training accompany a long list of other odd levies lawmakers in Michigan have proposed to bridge the state’s budget deficit.

But it’s not just the cost of keeping pets that’s on Michigan’s radar. Plumbing, fur storage, beauty parlors, funeral services, diaper services, massages, bowling, coin-operated video games, meat slaughtering, movie tickets, zoos and pest control are also on the state’s hit list.

“We’re having a hard enough time since our service is a luxury and not a necessity — this is not the time to do something like this,” said Linda Knobelsdorf, the owner of a small pet grooming company in Michigan.

According to the Michigan treasury, the entire tax reform package would generate more than $550 million in its first year, and the money raised would go to the state’s school aid fund.
Trying to play cupid
Trying to play cupid
Searching for your soul mate? Don’t go to Nebraska to find a date — the state might charge you for it.

Earlier this year, Nebraska was considering a tax on about 60 services not currently subject to the state’s sales tax, hoping to raise more than $44 billion by 2011.

In addition to a tax on the use of dating services, a whole slew of other odd services were in the running, including scooter and motorcycle repairs, shoe shines, reflexology, massages, tree trimming, taxidermy, fur storage, detective services, garment alterations, dance studios and armored car services. Getting your gun or camera repaired would have also cost you an extra few bucks.

Although the bill hasn’t been enacted into law and the state Legislature has adjourned for the year, it could be revived next year, said Gerry Oligmueller, state budget administrator of Nebraska. A real stretch
A real stretch
alleyCat Yoga, based in Columbia, Missouri
Missouri’s long-standing tax on yoga has come under fire in recent months after the state decided to re-enforce the levy despite opposition to a tax on what many yoga enthusiasts view as a spiritual practice.

Yoga is currently classified as a recreational service in Missouri and is taxed along with athletic events like Cardinal games and fitness club memberships.

But yoga studio owners and their customers argue that it’s part of a religion rather than a recreational activity.

“I understand the state needs money, but if anyone takes a minute to look at this, they will see that it’s just the wrong thing to do,” said Ken McRae, owner of alleyCat Yoga. “This is against the law. You cannot tax a religion, and by every definition, yoga is a religion.”

Although several bills have recently been proposed to exempt yoga from the state’s 4% tax rate, the legislative session ends May 14, so they are unlikely to be approved, said a spokesman for the Missouri House of Representatives.Compliments of the house (but not the state)
Compliments of the house (but not the state)
That free breakfast at Holiday Inn? Might not be free much longer.

In Tennessee, the General Assembly is considering applying the state’s sales tax to complimentary meals provided at hotels as part of its “sale for resale” initiative, which would tax items included as part of a service.

Customers would receive their free breakfast, but might be surprised to see a tax charge added onto their bill, if that hotel decides to pass along the cost.

The tax on complimentary meals is projected to bring in $1 to $2 million annually, and “sets Tennessee back in line with the majority of states collecting this revenue,” said Sarah Houghland, a spokeswoman for the Tennessee Department of Revenue.

Opponents of the tax argue that meals could actually end up being double-taxed, according to the Tax Foundation, since the cost of providing them is usually taken into account when a hotel determines its room rates, which are already subject to the state’s sales tax. Paper or plastic?
Paper or plastic?
In an eco-friendly step to bring in some extra revenue, West Virginia may impose a 5-cent tax on plastic shopping bags.

The tax would make it more expensive for stores to let customers bag their groceries in plastic rather than paper and is estimated to raise about $23 million per year.

“Plastic bags harm the environment a whole lot more than paper bags,” said John Doyle, a state delegate and lead sponsor of the bill. “I think if we tax plastic bags, what will happen is that most people will just want paper, and a paper bag’s not going to smother a turtle.”

While the bill didn’t pass in this year’s legislative session, Doyle said if he is re-elected, he’ll introduce the same bill at the beginning of next year. The sound of tax revenue
The sound of tax revenue
The Milwaukee Symphony Orchestra
Even musical performances aren’t safe from state budget shortfalls. The Milwaukee Symphony Orchestra, which is currently subject to the state’s sales tax, is now fighting the tax on admission to its performances.

The Milwaukee Symphony Orchestra’s performances are currently considered entertainment events and are subject to the state’s sales tax. But the Orchestra is arguing that its concerts are primarily educational or charitable, and therefore shouldn’t be taxed.

The Wisconsin Supreme Court heard arguments at the end of the year and the Symphony Orchestra is still awaiting a decision. Going green gets expensive
Going green gets expensive
An ill wind is blowing for Wyoming wind farmers. As one of the windiest states in the country, Wyoming hopes to make money from its booming wind industry by slapping a tax on wind energy production.

The state recently approved a $1 per megawatt hour tax on wind-generated electricity that will go into effect in 2012 for turbines that have produced electricity for at least three years.

“The intent of the tax was basically to allow all the citizens of Wyoming to enjoy and benefit from the success and prosperity this new industry has brought to the state,” said Ed Werner, a Wyoming county commissioner and energy consultant.

The tax will be paid by the turbine owner and revenue from the levy is expected to total at least $4 million a year.

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