Feb. 23, 2011 -- In their haste to find ways to fill gaping budget gaps, legislators across the nation are exploring odd corners of the economy, throwing fiscal spaghetti at walls, trying to see what sticks.
Taxes have become even more far-reaching in the recent economic downturn that began in earnest for governments more than a year ago, according to Kail Padgitt, an economist with the Tax Foundation, a non-partisan tax research group in Washington, D.C.
Businesses from tanning salons to balloon rides are coming under the scrutiny of lawmakers seeking tax targets. Colorado is even debating a tax on bull semen.
"You're not raising a lot of money with them. But the idea would be to patch budget holes," Padgitt said.
Connecticut consumers will see an increase in their sales tax and new levies on services like haircuts and car washes. Gov. Dannel Malloy proposed last week to raise sales and income taxes by $1.5 billion. Last month, Illinois increased its income and corporate tax rates, trying to solve its own fiscal woes.
Padgitt said most politicians are reluctant to raise major taxes, like income and sales taxes, so they often look for multiple smaller alternative sources of revenue.
"Some of the sources of revenue seem quite odd," Padgitt said. "They're taxing a small select group so you can push the burden onto a certain group but not alienate yourself from the majority of voters."
Here are some unusual taxes across the country, some state, some local and even a federal tax aimed at one industry:
Bull semen, Colorado
There's a heated debate in Colorado over applying sales tax to animal vaccines, hormones, animal drugs and yes, bull semen. Legislators reckon they can raise $1.5 million by getting rid of the exemption for these products. Ranchers and farmers are seeing red, and that's no bull. Haunted houses, New YorkThe creative accountants at advisory counsel of the New York State Department of Taxation and Finance declared last year that that haunted house admissions were subject to sales taxes.
Candy, ChicagoBeginning in September 2009, Chicago slapped a 6.25 percent on candy, an increase from the usual 1 percent food sales tax. But, the sticky part was deciding upon the definition of candy, said Padgitt. Chicago legislators decided that candy not prepared with flour, like hard candies, are subject to the higher rate. Candy that is prepared with flour, like Kit Kat bars, are considered food and taxed at 1 percent.
Starting July 1 of 2010, indoor tanning services were subject to a 10 percent excise tax according to the Affordable Care Act.
As part of the healthcare bill, Padgitt said the 10 percent tax is used to pay for some of the costs associated with the bill's other spending obligations, intended to make healthcare more affordable for others.
Non-medical water, Washington
Through June 30, 2013, the Washington State Department of Revenue is taxing bottled water -- except for sales of bottled water for medical reasons. We're not sure how medical water differs from regular H2O but the tax department is.
Fountain soda, Washington, D.C.
Our nation's capital taxed sweetened soda at 6 percent starting in 2010. Soda bought in a restaurant is subject to an additional 10 percent restaurant tax in the district.
"If you buy a can of soda you pay restaurant tax but if you buy from a drugstore, you don't pay the tax," said Padgett.
Cup lids and ketchup containers, Colorado
In March 2010, Colorado eliminated a tax exemption for non-essential food items and packaging. According Wallet Pop, "while cups are considered essential, cup lids are not and, hence, taxable."
Custom-made costumes, IndianaIn October 2010, the Indiana Department of Revenue issued a Letter of Finding that designing and producing costumes was subject for an additional state sales tax due to its nature as a "retail unitary transaction."
Balloon rides, Kansas
The wizard is not amused. Last year the Kansas' Department of Revenue decided that the state should tax tethered balloon rides. But if the balloon is piloted "some distance downwind from the launching point" it's tax-free!
Aloha from Hawaii
Neil Abercrombie, the state's new governor, wants to impose a tax on pension income, raise taxes on alcohol, slap a tax on soda and increase taxes on time-share properties.