As numerous state and local government agencies struggle with their budgets, many have taken to new taxes, or tax increases to makeup for lost revenue. Whenever a state is able to collect a decent amount of funds because of a new tax law change, other government agencies are quick to notice and enact a similar tax increase of their own. To help the readers of my blog stay informed on taxes they might have to pay down the road, I have compiled the following list of recent state taxing trends to be aware of.
Cigarette Tax Hikes
Taxes levied on cigarettes and other tobacco products are not new, but recently a handful of states have been increasing their cigarette tax rates. As I explained in this blog entry last month, New York has the highest tax on cigarettes and with recent increases the state levies an estimated $4.35 on every pack. Additionally, other states have been increasing tobacco taxes as an easy source of revenue. South Carolina – a state with a long history of tobacco farming – has even increased the taxes on cigarettes from 7 cents, to 50 cents per pack. The governor vetoed the tax law, but legislators had enough votes to override the veto. As local government agencies continue to look for ways to increase revenue, you can expect to see more cigarette tax increases over the next few years.
Other Sin Taxes
Taxes levied on cigarettes and other tobacco products, commonly referred to as “sin taxes,” also include taxes on other products that legislators consider bad for your health such as alcohol or sugary beverages. In addition to tobacco taxes, you are likely going to see other sin tax increases. The federal government has helped start this trend with their new tanning tax, and the state of NY already considered a soda tax (although lobbyists successfully defeated this new tax).
Although not a new tax increase, local amnesty programs are something you should be aware of. The city of Philadelphia recently executed an unpaid tax amnesty program, where delinquent taxpayers could pay the taxes they owed, and only half of the interest that would normally be due. Philadelphia’s program was extremely successful – estimates predict around $25 million in additional revenue for the city – and because of its success you can bet that other state and local taxing agencies will launch amnesty programs of their own.
Digital, Non-Tangible Property
One of the largest trends in state sales tax laws is likely to be on digital, non-tangible property. Historically, excise taxes are only levied on tangible property, but as the need for tangible products diminishes, local governments are expected to begin charging a tax on electronic transmissions. Therefore, when you go to purchase a game, mobile app, or even an Mp3 on iTunes, you might have to pay a local sales tax. Most states have sales tax laws that were written long before today’s “digital age,” and legislators are looking for ways to generate revenue from digital sales.
The “Amazon Tax”
In 2008 the state of New York implemented an “Amazon Tax,” which targeted out-of-state retailers such as Amazon.com and Overstock.com. Both popular online retailers actually challenged the tax law, but the courts sided with New York. The result was a tax on in-state businesses that show ads linking to a retailer’s site, and has supposedly generated additional revenue for the state. As such, other states including California, Connecticut, Maryland, North Carolina, and Tennessee are considering similar tax laws.