Fred50
02-20-2006, 11:01 PM
This article is from today's Star Ledger. It doesn't specifically mention laundromats, but it is scary nonetheless. We need to keep an eye out for any developments.
If we get hit with a sales tax on self-service revenue, it will be another big reason to switch to a card system.
__________________________________________________ __________
Sales tax may extend further
Revenue would aid budget crisis
Monday, February 20, 2006
BY JOE DONOHUE
Star-Ledger Staff
Rent a video from a Blockbuster store in New Jersey, and you pay state sales tax. Watch the same movie through your cable system's video-on-demand service, and you don't.
Spend a couple thousand bucks on a high-tech television and pay the tax. Spend that money on landscaping work around your house and it's tax-free.
To state officials searching for ways to solve New Jersey's recurring budget crisis, the many items and services exempted from the state sales and use tax are a tempting target. Proposals floating around Trenton would extend the current 6 percent tax to more kinds of purchases, or add another tax to cover what the sales tax doesn't.
"The sales tax in New Jersey has been ignored for too long," said Jon Shure, president of New Jersey Policy Perspective, a liberal think tank that favors an overhaul of the sales tax. "This has increasingly become a service and technology economy in our state, but the sales tax is still a tax from when this was a manufacturing and goods states."
Gov. Jon Corzine fanned speculation about sales tax changes last week when he said he was closely examining an alternative used by just a handful of states.
New Mexico, Hawaii and North Dakota are among the few states that tax most services -- but they do it indirectly, by taxing the gross receipts of businesses rather than individual sales to consumers. Collecting the tax at the wholesale level is far simpler, and while consumers end up paying through higher prices, there may be less public outcry against such a "hidden" tax.
By contrast, when Florida extended its sales tax to many services in 1987, the backlash was so furious that legislators, during a special session, repealed the extensions six months later and instead added a penny to the sales tax rate.
Whether direct or indirect, a tax on services by professionals ranging from lawyers, accountants and architects to barbers and limo drivers could go a long way to closing the state's looming $4 billion budget gap. One Treasury Department estimate indicated it could raise $2.2 billion annually.
Corzine's transition team last month recommended "closing illogical loopholes and exemptions in the sales and income taxes."
A draft of its report specifically mentioned tanning, massages, limousines and cable TV among services to consider taxing. It also suggested ending "large-scale" exemptions like that for clothing -- an idea sure to provoke howls from retailers and shoppers alike.
Those specifics were dropped from the final report last month, which simply said "The full range of exemptions must be considered."
Senate President Richard Codey (D-Essex) said taxing clothing is a non-starter. But he said other sales tax changes deserve full consideration because the state must increase its revenue base to end chronic budget shortfalls. "How you do that remains a source of talks, negotiations, compromises, whatever," he said.
While serving as governor last year, Codey proposed raising $275 million by expanding the sales tax to a slew of new services. The Democrat-led Assembly, facing election, rejected the idea.
Republicans like Assemblyman Joseph Malone, a budget committee member, say Corzine should keep his campaign promise to make taxes a last resort. "I believe the governor should refrain from committing to yet another tax increase until we have determined just how much fat we can cut from the budget," said Malone (R-Burlington).
"Creating a new tax to plug a budget hole will not solve New Jersey's underlying spending problem," said Assemblyman Richard Merkt (R-Morris). "The first priority in the budget process must be cutting spending and eliminating waste."
The state did recently extend the sales tax to one professional group -- plastic surgeons. Starting Sept. 1, 2004, the 6 percent tax was applied to face-lifts, hair implants, breast implants and other non-essential cosmetic procedures.
Jeff Monte, business manager for Christopher Godek, a plastic surgeon in Toms River who opposed the tax, said it caused much grumbling and some cancellations, particularly among some patients who received their initial price quotes before the tax took effect. But the complaints have tapered off. "Originally, it was more of a problem. People are now accustomed to it," Monte said.
Shure and others argue that expanding the tax to more services would spread the cost of state government more evenly. "The sales tax is not the best tax. But if we're going to have one, and I think we need to, we need to modernize it," he said.
"Most states could improve their sales taxes and their tax systems in general with some expansion of the tax base to include services," said a 2003 study by Michael Mazerov, an analyst with the Center on Budget and Policy Priorities in Washington, D.C. "Adding services could make tax systems fairer, more stable, more economically neutral and easier to administer."
David Rebovich, political science professor at Rider University, believes state officials will have to consider taxing more services because they are running out of other options for balancing the budget.
"The truth of the matter is, it's businesses who spend the most money on attorneys and lobbyists so the average person is not really going to get hit that hard," he said.
However, Jeannette Issenman, lobbyist for the Commerce and Industry Association of New Jersey, said smaller companies that often must hire outside professionals would be hard-hit. "A tax like that is really going to hurt small businesses because a lot of the large employers have in-house accounting and legal operations," she said.
Jim Leonard, lobbyist with the New Jersey Chamber of Commerce, said his group flatly opposes a gross receipts tax because some businesses could simply relocate to New York, Delaware or Pennsylvania to avoid it. "They are going to drive some of the activities outside the state, they are not going to get the revenues they thought they would, and they are going to put another cold blanket on an economy that is a lot less robust than our neighbors," he said.
"Obviously, this is a trial balloon," said Senate Minority Leader Leonard Lance (R-Hunterdon). While they will wait to see details of the governor's budget, he said, Republicans "don't want to increase the tax burden on New Jerseyans."
If we get hit with a sales tax on self-service revenue, it will be another big reason to switch to a card system.
__________________________________________________ __________
Sales tax may extend further
Revenue would aid budget crisis
Monday, February 20, 2006
BY JOE DONOHUE
Star-Ledger Staff
Rent a video from a Blockbuster store in New Jersey, and you pay state sales tax. Watch the same movie through your cable system's video-on-demand service, and you don't.
Spend a couple thousand bucks on a high-tech television and pay the tax. Spend that money on landscaping work around your house and it's tax-free.
To state officials searching for ways to solve New Jersey's recurring budget crisis, the many items and services exempted from the state sales and use tax are a tempting target. Proposals floating around Trenton would extend the current 6 percent tax to more kinds of purchases, or add another tax to cover what the sales tax doesn't.
"The sales tax in New Jersey has been ignored for too long," said Jon Shure, president of New Jersey Policy Perspective, a liberal think tank that favors an overhaul of the sales tax. "This has increasingly become a service and technology economy in our state, but the sales tax is still a tax from when this was a manufacturing and goods states."
Gov. Jon Corzine fanned speculation about sales tax changes last week when he said he was closely examining an alternative used by just a handful of states.
New Mexico, Hawaii and North Dakota are among the few states that tax most services -- but they do it indirectly, by taxing the gross receipts of businesses rather than individual sales to consumers. Collecting the tax at the wholesale level is far simpler, and while consumers end up paying through higher prices, there may be less public outcry against such a "hidden" tax.
By contrast, when Florida extended its sales tax to many services in 1987, the backlash was so furious that legislators, during a special session, repealed the extensions six months later and instead added a penny to the sales tax rate.
Whether direct or indirect, a tax on services by professionals ranging from lawyers, accountants and architects to barbers and limo drivers could go a long way to closing the state's looming $4 billion budget gap. One Treasury Department estimate indicated it could raise $2.2 billion annually.
Corzine's transition team last month recommended "closing illogical loopholes and exemptions in the sales and income taxes."
A draft of its report specifically mentioned tanning, massages, limousines and cable TV among services to consider taxing. It also suggested ending "large-scale" exemptions like that for clothing -- an idea sure to provoke howls from retailers and shoppers alike.
Those specifics were dropped from the final report last month, which simply said "The full range of exemptions must be considered."
Senate President Richard Codey (D-Essex) said taxing clothing is a non-starter. But he said other sales tax changes deserve full consideration because the state must increase its revenue base to end chronic budget shortfalls. "How you do that remains a source of talks, negotiations, compromises, whatever," he said.
While serving as governor last year, Codey proposed raising $275 million by expanding the sales tax to a slew of new services. The Democrat-led Assembly, facing election, rejected the idea.
Republicans like Assemblyman Joseph Malone, a budget committee member, say Corzine should keep his campaign promise to make taxes a last resort. "I believe the governor should refrain from committing to yet another tax increase until we have determined just how much fat we can cut from the budget," said Malone (R-Burlington).
"Creating a new tax to plug a budget hole will not solve New Jersey's underlying spending problem," said Assemblyman Richard Merkt (R-Morris). "The first priority in the budget process must be cutting spending and eliminating waste."
The state did recently extend the sales tax to one professional group -- plastic surgeons. Starting Sept. 1, 2004, the 6 percent tax was applied to face-lifts, hair implants, breast implants and other non-essential cosmetic procedures.
Jeff Monte, business manager for Christopher Godek, a plastic surgeon in Toms River who opposed the tax, said it caused much grumbling and some cancellations, particularly among some patients who received their initial price quotes before the tax took effect. But the complaints have tapered off. "Originally, it was more of a problem. People are now accustomed to it," Monte said.
Shure and others argue that expanding the tax to more services would spread the cost of state government more evenly. "The sales tax is not the best tax. But if we're going to have one, and I think we need to, we need to modernize it," he said.
"Most states could improve their sales taxes and their tax systems in general with some expansion of the tax base to include services," said a 2003 study by Michael Mazerov, an analyst with the Center on Budget and Policy Priorities in Washington, D.C. "Adding services could make tax systems fairer, more stable, more economically neutral and easier to administer."
David Rebovich, political science professor at Rider University, believes state officials will have to consider taxing more services because they are running out of other options for balancing the budget.
"The truth of the matter is, it's businesses who spend the most money on attorneys and lobbyists so the average person is not really going to get hit that hard," he said.
However, Jeannette Issenman, lobbyist for the Commerce and Industry Association of New Jersey, said smaller companies that often must hire outside professionals would be hard-hit. "A tax like that is really going to hurt small businesses because a lot of the large employers have in-house accounting and legal operations," she said.
Jim Leonard, lobbyist with the New Jersey Chamber of Commerce, said his group flatly opposes a gross receipts tax because some businesses could simply relocate to New York, Delaware or Pennsylvania to avoid it. "They are going to drive some of the activities outside the state, they are not going to get the revenues they thought they would, and they are going to put another cold blanket on an economy that is a lot less robust than our neighbors," he said.
"Obviously, this is a trial balloon," said Senate Minority Leader Leonard Lance (R-Hunterdon). While they will wait to see details of the governor's budget, he said, Republicans "don't want to increase the tax burden on New Jerseyans."