What’ll They Tax Next?
(CNN MONEY) 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.
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
The Magic of the Steelgraves
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
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
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.
A Real Stretch
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.
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.