A Blizzard of Fees

Taxes are being raised in many corners of state and local government to help fill shortfalls. Many states look to raise taxes on the politically low-cost: “vices”, like cigarettes and alcohol, or goods and services used by tourists – hotels, rental cars, other little-noticed items. In addition to the largest ever hike in federal cigarette taxes (from 39 cents per pack to $1.01 per pack) a few weeks ago. Over 20 states are considering similar hikes this year, including New York with the highest state cigarette tax in the nation. Alcohol tax hikes are proposed in Oregon,  New Jersey,  California, Hawaii, Massachusetts, Michigan, Nevada, and North Carolina, car rentals in Colorado, and  cell phone ringtones in Kentucky, “we’re seeing a blizzard of new fees to help states balance their budgets,” reports Sujit CanagaRetna, a senior fiscal analyst with the Southern Legislative Conference of the Council of State Governments.

And it may become even harder for consumers to avoid. West Virginia is talking about taxing internet, catalog and telephone sales.They make a novel argument.  Internet sales are undertaken by wealthier consumers – those with computers and credit cards – and thus represent a “loophole…benefiting those who are more well off.”  Of course, this argument gets weaker when one extends it to catalog and telephone sales. Brick and Mortar shops like the idea.  eBay doesn’t.

The state is part of a consortium that has been pushing for a Streamlined Sales and Use Tax, as it is known,  for several years.  The consortium and federal supporters argue that the expansion of Internet sales has eroded sales tax collections, which are an important source of revenue for states.  But technology taxes are also a huge temptation for governments that have shown little fiscal restraint or responsible budgeting. Once such a tax is levied, creeping increases will be impossible for legislators to resist.