The IRS are not the most popular chappies in existence, but there is always a certain logic to what they tax and what deductions they allow. The taxpayers understand this logic generally, and so they take advantage of some of the common advantages, such as the Home Interest Deduction, which encourages home ownership, and the Charitable Deduction, which encourages people to be generous to charities. Taxpayers also enjoy the benefits of marriage based on the favorable tax brackets when filing your taxes “married filing jointly.”
However, some of the state tax laws that still exist may leave you scratching your head. A recent article by Yahoo! Finance lists some of these peculiar taxes, and now a bona fide tax lawyer (yours truly) will help explain what gives.
1) Maryland’s Flush Tax: $60 per year.
Maryland had a problem: how to raise money to improve its treatment plants and simulataneously protect the Chesapeake Bay. Solution? Tax everyone in the area for flushing your toilets. The tax is applied by adding $5 per month to customers of the St. May’s Metropolitan Commission, which operates public water and sewer systems. Though the tax sounds ridiculous, it is really just a general tax on use of the public water system. I would be curious to see if anyone stopped flushing to avoid the tax—I think it is worth it to just pay.
2) New York Bagel Tax: 8 cents a bagel.
How to raise money in NYC? The easiest way is to tax a luxury item that everyone enjoys. The New York Bagel is a thing of legend, and adding a mandatory .08 per bagel to the government is unlikely to stop New Yorkers from enjoying their favorite treat. It may sound mean, but it is certainly an efficient way to raise some money. Interestingly, buying a bagel in a grocery store type setting does not trigger the tax—it is those on the go bagels that are hit.
3) Arkansas Tattoo Tax: 6 percent.
This is a typical “sin tax.” Taxing behavior that the state considers morally dubious is a way to disincentivise its citizens from engaging in that behavior, or at least benefitting the state if they do. The state of Arkansas here may be associating tattoos with gang crime and violence, but naturally are also hitting a number of people who do not engage in such activities. For those people, it may be more of a luxury tax than a sin tax. Taxing unnecessary activities such as this is considered more popular, since only those individuals who choose to engage in that activity (often a minority) are damaged.
4) Jock Tax (Multiple States)
Roughly 20 states including Arizona and New Jersey tax the revenue of professional athletes who come into their jurisdiction to play. Though enormously unfair sounding, the idea is that these players benefit from coming into the jurisdiction and playing on the opponent’s field or court. Again, the states get away with this unfair treatment because only a very small number of people are affected, and those athletes are willing to pay the tax rather than not play in those jurisdictions. Naturally, athletes have taken issue at these taxes and recently in Ohio, two NFL players from the Bears and the Colts have brought the tax before the Ohio Supreme Court.
5) Maine Wild Blueberry Tax: $1.50 per 100 lbs.
Maine taxes wild blueberries either processed in the state or shipped unprocessed outside the state. Here, the state of Maine clearly wants to protect its own precious natural resource, which businesses could take advantage of otherwise. The tax is very successful. In 2012, Maine collected over $680,000 with this tax. This tax is not so surprising to me; the State feels that it has a right to these wild blueberries, which if on public land are not owned by any other individual. To enforce this law, Maine must also heavily punish anyone picking berries secretly who is not paying the tax. Therefore, it is recommended you go to one of the established blueberry picking farms if that is your idea of a fun holiday.
* John Hodnette is a third year law student at Wake Forest University School of Law. He holds a Bachelor of Arts in English, with a minor in Philosophy, from Auburn University. Upon graduation, he intends to practice in the Chicago area.