Cities and States Beat the Bushes in Search of New Tax Revenues

Howard Gleckman of the Tax Policy Center notes that state and local authorities have developed a range of “unconventional state and local taxes” to supplement the revenues from the usual income, sales and property taxes. Gleckman traces the origin of these new taxes to the state-run lotteries of the 1970s, which by 2016 were doing more than $80 billion in sales.

The new taxes account for a relatively small share of overall state and local revenue, Gleckman says, but tax authorities are becoming more interested in them every year, and a handful of the levies are now seen as important future revenue sources.

The unconventional taxes Gleckman highlights include:

• Head taxes applied to large employers, usually within a city. Seattle recently enacted — and then repealed — a head tax designed to pay for low-cost housing.
• Marijuana taxes could be the money-maker of the future, with 30 states now legalizing pot. The money is substantial: Colorado alone collected $250 million in marijuana taxes and fees last year.
• Gambling taxes will see a big boost in the wake of the Supreme Court’s recent ruling that opens the door to sports betting in the states. New Jersey enacted legal sports betting just this week.
• Tourist taxes, because it’s always easier to tax people from somewhere else.