May 22, 2009 / 6:47 PM / 10 years ago

From pot to "pole" tax: U.S. states seek economic help

WASHINGTON (Reuters) - From legalizing marijuana and then taxing it, to increasing death certificate fees and charging gentlemen’s club patrons an extra $5 at the door, cash-strapped U.S. states and cities are rooting around for revenue in some unconventional places.

Bundles of the estimated 4,000 pounds of confiscated marijuana line the Hidalgo County Sheriff's Department evidence room in Edinburg, Texas April 14, 2009. REUTERS/Jessica Rinaldi

But even those able to scrounge up funds from untapped sources will likely still need federal help or traditional tax increases to recover from a 17-month recession that has dried up revenue, drained spending capabilities and nearly obliterated the usual last resort of borrowing.

Sin seems most ripe for the taxing in a list of proposed revenue moves compiled by the National Conference of State Legislatures last month.

A California state legislator has proposed making marijuana legal and then charging a $50-per-ounce tax on it, along with the state’s sales tax. Oregon has considered levying a $98-per-ounce duty on its legal medical marijuana.

Pornography, too, may have to shoulder part of the financial burden of some states. California lawmakers have proposed increasing sales taxes on sexually explicit content, while Virginia will soon start taxing hotel movie rentals.

Connecticut may reduce the commissions to those who sell lottery tickets and New Jersey could take unclaimed slot machine winnings.

Georgia lawmakers call the $5 fee they could charge customers at erotic dancer bars a “pole tax.”

“Many of these kinds of things that they do at the state level raise modest levels of money,” said Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government. “They want to avoid raising the marquee taxes.”

Citizens may revolt against income tax increases he said, and not notice smaller fees inching up. Also, when state governments ultimately raise the larger taxes, they can say they have done so only after tapping all other alternatives.

During the 2001 recession, many wanted to leave income and sales taxes untouched and “they had a ready source that time, which was tobacco taxes,” said Boyd, who has also served as director of tax policy and revenue analysis for the state of New York budget office, adding:

“I don’t think there’s a counterpart this time around.”

CITIES ALSO SEEK HELP

Cities are looking at everyday life for revenues.

Providence, Rhode Island, for example, wants to charge the private colleges in the city, namely Brown University, a “student-impact fee” of $150 per student per semester.

New York City Mayor Michael Bloomberg has proposed a five-cent fee on plastic shopping bags — a move that would raise an estimated $100 million a year, according to a recent study of big city budgets by The Pew Charitable Trusts’ Philadelphia Research Initiative.

That comes after the city considered levying an extra tax on sodas.

Washington, D.C. will also tax bags, but the revenue is earmarked for ending river pollution. The city council recently passed a budget that includes attaching cameras to street sweepers to ticket errant parked cars in the hope of collecting nearly $7 million.

The district’s Chief Financial Officer recently told the U.S. Congress it should be allowed to tax federal buildings and is calling for the law barring local buildings from being taller than the Capitol to be lifted in hopes of garnering more real estate taxes.

But residents may not be on board for new fees, said Larry Eichel, project director for the Pew’s initiative.

“There tends to be more resistance to having a new fee than to raising an old fee,” he said, adding that cities often must receive approval for taxes from their states and states may not be eager to give cities new revenue-raising powers when they are having their own fiscal problems.

Even with unconventional revenue methods in the works, many states are relying on tried and true tax increases along with drastic spending cuts to keep their budgets balanced.

The nonpartisan think tank Center on Budget and Policy Priorities says that 19 states have cut public health programs for low-income children and families, and at least 21 are cutting programs for the elderly. Nearly half of the states in the union are also cutting education.

At least 16 states have raised income, business, sales and excise taxes already in 2009, and another 15 are weighing taking the same step.

Additional reporting by Karen Pierog in Chicago; Editing by James Dalgleish

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