Every time you turn around, some ridiculous tax policy is being proposed in Wisconsin. Whether it's Governor Doyle's proposed tax on oil companies, Governor Doyle's proposed tax on hospitals, a proposal to tax soft drinks put forth by some legislators, a gigantic payroll tax hike to pay for universal healthcare within the state that would basically double the state's tax burden, or the state's continuous support of tax credits for specific industries and companies, the state is a bastion of bad tax policy. (It actually makes you appreciate the federal tax system.)
Now one state senator is proposing a special tax on video games to fund the juvenile detention system in the state. Here's the story from DailyTech:
This week, Wisconsin state Senator Jon Erpenbach proposed a bill that would add an additional tax on video games and gaming equipment, like consoles and accessories.
The new tax would levy a 1% surcharge on the sale of video games and related equipment, with funds applied towards the cost of moving non-violent, delinquent 17-year-olds into the juvenile detention system, as they are currently treated, prosecuted, and incarcerated as adults.
According to Erpenbach, the tax has nothing to do with dissuading gamers or casting videogames in an undesirable light; rather the idea is that the tax is "a kind of kids-kids thing," with gamers helping out fellow youth stuck behind bars in an adult prison system.
Despite the fact that the bill's emphasis is on moving non-violent youth offenders into the juvenile court system, gamers have latched onto the tax as an unfair attack on their hobby. Justin Sallows, an adult Wisconsin gamer speaking to WISC-TV, thinks that the tax is "a real problem ... even if that's not what the intention is, it creates the impression that there's something wrong with the video games because we need to put some extra tax on there to try to dissuade people from playing them."
Erpenbach's logic is this: kids should have to pay a tax on video games to help out other kids their age that engage in bad behavior. There are many problems with this logic. First, the move that Erpenbach is suggesting within the juvenile detention system would benefit everyone in the state, not just children who play video games. His ridiculous "kids-kids logic" could be extended to every program that sends government funds to children. Maybe a video game tax and a tax on other products that children disproportionately buy should pay for public schools too.
But even if one buys the "kid-kids" argument, there are many more industries where young people buy products at a disproportionately higher rate than others. Why not put taxes on certain types of music, clothes, or entertainment? Or why not go directly at the source and put a special tax within the income tax system on people who work at ages 16 or 17, or raise the drivers license fees on people those ages? This may sound stupid and discriminatory, but that's exactly what this proposal is.
Today's Wall Street Journal has an editorial piece discussing the Quill physical presence rule. That's the constitutional bar which prevents states from forcing out-of-state businesses to collect each state's sales tax on purchases. Overturning Quill would mean that retailers would have to collect taxes based on where the seller lives (not where the business is), an obligation that would next extend to brick-and-mortar businesses. The editorial recognizes this:
[S]mall merchants could potentially have to keep track of 86,000 different tax rates, depending on what they sell and to whom. But what about nine-digit zip codes? Could governments create different rates within each one? Yes indeed.
Believe it or not, it gets worse. The board of state and local tax collectors that administers the "streamlined" plan recently amended the agreement. Now the plan would allow some states to choose whether to tax online purchases at the seller's address or the buyer's, depending on whether they're in the same state. The end result will be different tax rates for in-state and out-of-state vendors—a clear Constitutional violation.
As I explained in Why the Quill Physical Presence Rule Shouldn't Go The Way of Personal Jurisdiction and in a recent commentary, overturning Quill will create uncertainty and discrimination:
While some constitutional principles surely must be revisited to apply them to new circumstances, the idea that parochial state interests cannot burden interstate commerce remains a timeless principle regardless how sophisticated technology may be.
The effort to kill Quill is nothing more than states attempting to boost their tax revenues at the expense of the national economy.
Press release from the Internal Revenue Service today on the delay in refunds caused by Congress's procrastination on passing a patch for AMT:
The Internal Revenue Service announced today that the upcoming tax season is expected to start on time for everyone except certain taxpayers potentially affected by late enactment of the Alternative Minimum Tax "patch."
Following extensive work in recent weeks, the IRS expects to be able to begin processing returns for the vast majority of taxpayers in mid-January. However, as many as 13.5 million taxpayers using five forms related to the Alternative Minimum Tax (AMT) legislation will have to wait to file tax returns until the IRS completes the reprogramming of its systems for the new law.
The IRS has targeted Feb. 11, as the potential starting date for taxpayers to begin submitting the five AMT-related returns affected by the legislation. The February date allows the IRS enough time to update and test its systems to accommodate the AMT changes without major disruptions to other operations related to the tax season. As the IRS has said previously, it will take approximately seven weeks after the AMT patch was approved to update IRS processing systems completely.
Although as many as 13.5 million taxpayers will not be able to file their returns until Feb. 11, the effect of the delay may be lessened by the fact that under previous filing patterns only between 3 million to 4 million taxpayers file returns with the five affected forms during these early weeks in the filing season.
In an odd way, it will not affect all of those filing Form 6251, which is the AMT form. People filing other forms, however, will be affected. These changes, according to the IRS, take longer for the IRS to reprogram their computers compared to the mere change in exemption levels. Specifically, here are the forms that could cause delays:
Form 8863, Education Credits.
Form 5695, Residential Energy Credits.
Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
Form 8396, Mortgage Interest Credit.
Form 8859, District of Columbia First-Time Homebuyer Credit.
An excellent Washington Post oped by Sally Pipes ("Brave New Diet") warns the public against scaremongering about our weight. She shines a light on the faults of the government's BMI Index by pointing out that Kobe Bryant, Tom Brady and other superfit athletes are overweight according to their BMIs. Oh, to be overweight like Kobe!!
And even if the BMI Index (ratio of height to weight) were an accurate measure of healthy weight, what was the validity of the 1998 government decision to lower the definition of overweight from a BMI of 27 to 25, making 25 million Americans suddenly "overweight"?
It might be partly to justify new taxes. Proposals for so-called fat taxes on soda and snacks are all the rage now, and the higher those obesity numbers are, the more likely we might be to relent and start letting legislators count our calories. We've written about such proposals in New Mexico and Colorado and more generally nationwide. Here was a fat tax lesson from Australia, and here's a humorous commentary from England.
Pipes is worried about the "nanny state" in general, that is, a government that conceives of its role as telling everyone what to do, supposedly for their own good. That's something Harvard scholar Kip Viscusi is also concerned with.
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