New Taxes from a Desperate Government

The state of New Jersey wants to tax the value of unused gift cards.

We’ll let that sink in for a bit.

[a bit]

“The state will soon begin requiring gift card sellers to obtain ZIP codes from buyers so it can claim the value of cards not redeemed after two years,” according to an Associated Press story.

If you have a two-year old gift card sitting around, you can still use it as long as it’s not expired.

“But if the state has already laid claim to the money,” says the AP, “businesses might have to jump through administrative hoops to get reimbursement — and therefore stop selling gift cards altogether to avoid the hassle.”

American Express’ gift card unit is already bailing from the Garden State.

For the moment, no other state is trying this. At least not until the scads of litigation that resulted from New Jersey’s gambit get sorted out in court.

Meanwhile, scores of businesses in New York City are suddenly learning they’re in arrears on three years’ worth of taxes they didn’t know applied to them.

The city has decided yoga studios must pay a sales tax covering businesses devoted to “weight control” or “health salons.” Audits are underway.

“Yoga classes have been around forever and not taxed,” protests Alison West of the lobbying group Yoga for New York. (In other news, yoga studios have a lobbying group in New York.)

“Last Monday afternoon,” reports The Wall Street Journal, “more than 70 yoga managers, studio owners and instructors sat down in the lotus position to discuss the tax issue — and other troubles — at Yoga Union, a studio in the Flatiron District. West said the atmosphere was ‘concerned, dynamic and productive.’”

Bummer. It’s going to be hard to meditate this bill away.

In Connecticut, what critics have dubbed the “Priceline tax” is working its way through the legislature.

“The proposed bill,” says State Rep. John Piscopo, “would impose a new tax on travel services by subjecting service fees charged by travel agents and other intermediaries for facilitating hotel bookings in Connecticut to the state’s hotel occupancy tax.” That includes outfits like Priceline, Orbitz, and Travelocity.

That’ll be a killer for the sort of quaint mom-and-pop bed-and-breakfast places at the heart of New England tourism; they count on the online outfits to do the bulk of their marketing.

We chronicle these “new taxes and weird fees” to make this point: State and local governments are getting desperate for new sources of revenue. State revenue alone fell $50 billion in 2008-09, Federal Reserve figures show.

“According to experts, it will be years until states have recovered enough to restore services to pre-recession levels,” says U.S. News and World Report.

In the meantime, you and the local businesses you patronize are looking more and more like a milk cow to legions of bureaucrats.

Addison Wiggin
for The Daily Reckoning

The Daily Reckoning