You Want to Tax What? Government Gets Desperate

From stripper fees to surveillance, governments try wacky tax measures.

ByALICE GOMSTYN <br/> ABC NEWS Business Unit
March 20, 2009, 5:07 PM

March 23, 2009&#151; -- In Chicago, surveillance cameras may someday help the city to fine more uninsured drivers. In Ohio, a city court is limiting its new cases because it can't afford more printer paper. In California, there's a loud call to tax marijuana sales. And in Georgia, one lawmaker says he's not giving up on his proposal for a state strip club surcharge.

Across the country, these and other unusual money-saving and money-making efforts have been volleyed by government officials desperate for funding.

"A new wave of creativity is sweeping across budget offices these days," said Pat Hagan, national audit partner for state and local governments at Deloitte and Touche LLP.

Because the recession has cut so sharply into property tax, sales tax and income tax revenues, Hagan said, state and local officials are looking for nontraditional sources of cash.

"There are funny stories, although they're quite serious topics," he said.

Among the efforts drawing the most attention are so-called "sin taxes" -- taxes on products or services that many associate with vices like alcohol, smoking, pornography, strip club visits and in Nevada's case, prostitution.

Some sin taxes, though, Hagan said, aren't as effective as proponents may hope because they target only a limited number of people -- those who smoke or visit strip clubs.

Certain efforts to cut government spending, likewise, may result in only limited savings.

But, Hagan added, "Sometimes people want to do this in their communities because it sends the right signal that these are tough times, and you don't want your government to be spending frivolously."

Following is a look at unusual efforts -- both large and small -- to help governments boost their bottom lines.

It's been dubbed the "pole tax," but Georgia State Sen. Jack Murphy insisted his money-making proposal is really a surcharge, not a tax.

The Republican lawmaker is asking the state government to charge a $5 fee per visit to patrons of strip clubs. The revenue from the surcharge, he said, would go to fund new rehabilitation centers for teenage prostitutes.

"This bill is strictly to try to get some of these 13-, 14-year-olds off the street to give them a place to go, give them some therapy," he said.

If Georgia was flush with cash, Murphy said, he wouldn't include a proposed funding source -- the surcharge -- in his campaign for new rehab centers.

But right now, according to the Georgia governor's office, the state is $2.6 billion in the red.

"I couldn't see sending forth a bill without having some sort of funding source in it because we need money," Murphy said.

It's unclear how far Murphy's proposal will get. The bill didn't make headway in the state legislature, so now, the state senator said, he'll try to attach it as an amendment to more successful bills.

Proponents for the legalization of marijuana have a fresh argument on their side: Legalizing the drug would open it to regulation and, of course, taxes.

Democratic California assemblyman Tom Ammiano has proposed a bill in the state assembly that would do just that.

"With the state in the midst of an historic economic crisis," Ammiano said in a recent statement, "the move toward regulating and taxing marijuana is simply common sense. This legislation would generate much needed revenue for the state" and provide other benefits, such as freeing up police to pursue "more serious crimes."

A marijuana tax is projected to bring in $1.3 billion in new revenue to the state each year, but that hasn't swayed opponents to legalization.

Groups like Save Our Society From Drugs argue that legalizing marijuana would increase other costs, such as health care, and would lead to societal consequences, including more crime.

Even in the digital age, court proceedings are flush with paperwork. Unfortunately for the Morrow County Municipal Court in Ohio, it doesn't have much paper to work with.

The court stopped requesting new paper supplies after the county went $2,600 in arrears on its office supply bill, leading Judge Lee McClelland to make a headline-grabbing decision: The court wouldn't take any new cases -- be they from the county prosecutor or average Joe plaintiffs bringing a lawsuit -- unless people bringing the cases also brought their own paper.

"It sounds kind of simple, but without paper everything stops," McClelland told "We're trying to conserve what we do have so the court doesn't come to a grinding halt."

Since McClelland first announced the policy last week, he's received two donations of paper -- that is, paper not tied to new or pending cases -- but supplies are still tight, he said.

"We're working on day to day right now," he said.

License Plates and Parties

Iowa lawmakers recently solicited suggestions from the public on how the state could cut spending. The response, provided through a Web site, has been encouraging, said Iowa House Minority Leader Kraig Paulsen, a Republican.

"We've been pretty excited about both the quantity and the quality of suggestions," he said.

Iowa House Republicans have seriously considered about two dozen of the public's suggestions, including a proposal to cut the state's license plate requirement from two per vehicle -- one plate on the front and another on the back -- to just one.

"Not only does it save you production costs, my guess is there's also some logistics costs, as well as far as shipping them and making sure you keep them paired up," Paulsen said. "If there was just one, you have 50 percent of products you have to handle."

Another suggestion was to crack down on state government office parties that use state funds to pay for supplies.

While Paulsen acknowledged that parties may provide a morale boost in tough times, he said state employees should pool their own cash to pay for them.

"The taxpayers of Iowa don't need to be funding parties in the state offices," he said. "At least on the surface, it just appears to be something that's flat wrong."

By now, many drivers have become grudgingly familiar with the surveillance cameras perched near traffic signals in different parts of the country.

They're there to catch and record the license plates of motorists running red lights. The traffic tickets that are issued as a result of the lights can provide governments with a valuable source of revenue.

Now, the city of Chicago is considering deriving another stream of revenue from the traffic cams: They could be used, proponents say, to catch and fine insurance scofflaws.

The license plate numbers that the cameras catch would be run through a database that would check whether the corresponding vehicle was insured. If not, its owner could be slapped with a fine of up to $500.

Jonathan Miller, the president of InsureNet, an auto insurance verification service, projected that Chicago could see an annual windfall of at least $200 million from such a program.

Others said the program would provide more than just fiscal benefits. It could encourage more people to get insurance.

Charging for 911

Emergencies cost money. Now officials at the Fire Department of the city of Santa Rosa, Calif. hope that the public will help defray the cost.

The department is proposing that Santa Rosa residents pay a $4 per month "subscription" to fund 911 calls. Residents who choose not to subscribe would be billed $350 for each 911 call they make.

"We're into our third round of budget reductions with layoffs and we're looking for every opportunity we can to try to fill a gap in the revenue coming in compared to the cost of service going out," said Deputy Fire Chief Mark McCormick.

McCormick said that 15 California cities have similar subscription programs that have proved successful. Contrary to what some expect, he said, the programs haven't led to a decrease in 911 calls.

But at least one city concluded that 911 subscriptions were a bad idea: Ventura, Calif., dropped its program late in 2008 after encountering billing problems, complaints and a lawsuit.

In New York, some unusual tax ideas have gotten the boot thanks to government stimulus funds. Last week, New York Gov. David Paterson announced that he and state legislature leaders agreed to use more than a billion dollars of stimulus money in lieu of Paterson's proposals to tax sugary drinks, haircuts, manicures, bowling, skiing and online music downloads, among other products and services.

But New York isn't in the clear yet, Paterson said.

"[Officials] cannot treat a temporary windfall from Washington as an excuse to avoid the tough choices we must inevitably make to get our fiscal house in order," he said in a recent statement. "Federal funding will cover only a fraction of our overall budget deficit, and the economic outlook remains uncertain."

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