States Desperate for Revenues Want to Tax Services

Posted on March 28, 2010

The New York Times reports that states desperate for revenue are looking to tax services including garbage pickup, dating services, bowling, haircuts, funerals, legal services, dry cleaning, accounting services and more. The Times says strugglng small businesses are concerned the new taxes will push business away.

Opponents of imposing taxes on services like funerals, legal advice, helicopter rides and dry cleaning argue that this push comes as businesses are barely clinging to life and can ill afford to see customers further put off by new taxes. This is especially true, they say, in states like Michigan and Pennsylvania, where some of the most sweeping proposals are being considered this spring.

But this is also a period of economic gloom for states. Pension funds are in the red, federal stimulus help will soon vanish, and revenues from traditional sources like income and property taxes are slumping ever lower, with few elected officials willing to risk voter wrath by raising them.

"This is born out of necessity," said Gov. Edward G. Rendell of Pennsylvania, a Democrat. His proposed budget, being debated in Harrisburg, would tax services including accounting, advertising and data processing.

Michigan is one of the hardest hit states. The Times says Michigan's revenues have shrunk to 1960s levels when adjusted for inflation. States see the additional taxes as ways to increase revenue but they may find it backfires if businesses leave for more tax friendly states.