States Seeking Cash Hope to Expand Taxes to Services

By MONICA DAVEY

In the scramble to find something, anything, to generate more revenue, states are considering new taxes on virtually everything: garbage pickup, dating services, bowling night, haircuts, even clowns.

“It’s hard enough doing what we do,” grumbled John Luke, a plumber in the Philadelphia suburbs. His services would, for the first time, come with an added tax if the governor has his way.

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.

Mr. Rendell argues that the state’s current sales tax system makes no sense. (Why, he asks, is the popcorn in his state’s movie theaters taxed, but the candy is not?)

“Look, I’m not a crazy tax guy,” Mr. Rendell said, reflecting on recent trims to the budget. “I know what we’ve cut the last two years, and I know how deep and painful the cuts have been. So I know that in the future there’s going to have to be a revenue increase, and this is the best of the alternatives, obviously none of which we’re happy about.”

To read more, visit: http://www.nytimes.com/2010/03/28/us/28taxes.html?th&emc=th

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