Sales Tax Holiday Blooms Shopping Season

Local shopping centers are gearing up for coming annual “Back to School” sales tax holiday a weekend as big as during the holiday shopping season.

The Missouri state sales tax of 4.225 percent will be dropped on clothes, computers and school supplies starting at midnight Aug. 6 and lasting through Aug. 8. Many municipalities also are dropping their local sales taxes for the weekend, letting customers buy qualified items tax-free.

For seven days in August, Maryland shoppers can purchase certain clothing items costing less than $100 without paying the state's 6 percent sales tax.

The Mississippi sales tax holiday weekend is July 30 and 31st. It's back to school shopping made easier in Mississippi, but retailers hope it's not just school shoppers cashing in. Clothing and shoes will be exempt from the state's sales tax; retailers say it's a time for customers to buy.

A 2007 law established Aug. 8-16 of this year as a "sales-tax holiday" because legislators thought that by now the state would have a budget surplus and could afford the revenue loss. But tough economic times have lasted longer than anyone expected, to the point where what the state is really doing now is giving up money it doesn't have.

The tax holiday is expected to cost the state treasury about $9 million in lost revenues. That's enough to provide 1,000 families with emergency housing assistance, or state college scholarships for 4,500 students. And it comes as the state is about to grapple with how to fill an expected $1.5 billion revenue hole resulting from lower revenues brought on by the recession.

Job Creation Tax Credit Causes and Effect

Whether the job creation tax credit signed in law last March is having any effect, Treasury Department officials reported. Though it took some time for a clear picture to develop, we're pleased to learn that the tax incentives the state grants companies to create jobs.

The Treasury study compared responses from the Labor Department's Current Population Survey the basis for the government's labor force data and the unemployment rate for three consecutive months to May. This tax program, part of the Hire Act of 2010, is intended to encourage businesses to add workers who have been out of a job for at least 60 days by making it cheaper to employ them.

Usually, the federal government collects Social Security payroll taxes on salaries, amounting to 12.4 percent of every employee’s wages (up to $106,800; any wages over that amount are not subject to Social Security taxes). Half of this payroll tax, or 6.2 percent, comes from the employee, and the other half, or another 6.2 percent, is collected from the employer. For the average wage of the 4.5 million workers cited by Treasury, employers could see up to $3,500 in tax savings for each, however that smaller firms may not be as aware of the credit as larger firms with larger human resources departments.

Under the Hire Act, businesses that hire the long-term unemployed do not have to pay this 6.2 percent tax on each worker for the remainder of 2010. Additionally, if these new employees stay on for a year, the employer gets another tax credit of $1,000. The challenge, of course, is making sure that the tax credit actually induces hiring, rather than just being claimed for people who would have gotten jobs anyway.

The Treasury Department is now trying to assess how well the program is working, and is finding it a challenging task. The Obama administration is trying to extend the act, which expires at the end of the year, in the hopes that it will still be around by the time word actually spreads.

Long Beach Tax on Medical Marijuana

Long Beach is joining the cities of Berkeley and Sacramento in considering a tax on medical marijuana collectives to help close their budget gaps. Proposed ballot measure would levy a 5% tax on medical pot collectives and another tax of 10% if recreational pot is legalized. But it would require a special election costing up to $450,000.

When Long Beach voters join other Californians in November to decide whether to legalize recreational marijuana, they may also get the chance to decide if it should be taxed. The City Council took a step toward putting a marijuana tax measure on the ballot that would levy a 15 percent tax bumped up from a proposed 10 percent on the recreational drug and a 5 percent tax on medical marijuana. City officials don't know how revenue the tax would raise, but they're looking for every penny to help eliminate an estimated $18.5 million budget deficit in the next fiscal year.

The Los Angeles suburb with a population of almost 500,000 scheduled a public hearing on the drug levy for Aug. 3. If the council later approves the wording, a ballot initiative establishing a 5 percent tax on the city’s 35 dispensaries could go to voters in November, according to Lori Ann Farrell, Long Beach’s director of financial management.

Long Beach joins California cities including the state capital, Sacramento, weighing marijuana taxes to bridge falling revenue from the worst recession since the 1930s. The nation’s largest state by population saw an explosion in the number of marijuana dispensaries after voters approved a 1996 referendum legalizing pot for medicinal use.

Discussion of the tax comes as the state prepares to vote on Proposition 19, a referendum on the November ballot. If approved, the measure would make it legal for anyone age 21 or older to possess one ounce or less of marijuana, and allow local governments to regulate and tax sales. The medical marijuana tax is modeled after one by the City of Oakland, which expects to collect $1 million a year in revenue from its four authorized dispensaries.

Home Buyers Rushing to Meet Sales Tax

Some home buyers who rushed to sign sales contracts to meet an April deadline for an up to $8,000 tax credit, may not get their money after all. Deadline to claim a federal tax credit as banks and title companies deal with a crush of closings.

Home buyers hoping to get the tax credit have until June 30 to close their deals. But the U.S. Senate failed to pass a bill that contained an amendment that would have extended that deadline to Sept. 30. The real-estate industry stepped up calls for an extension of the closing deadline in recent weeks amid concerns that some buyers might miss the deadline after a last-minute home-buying rush led to bottlenecks at banks, appraisal firms and title insurers. The Post-Standard last week said they have clients who won’t close before the deadline.

The American Recovery and Reinvestment Act of 2009 offered first-time home buyers an $8,000 credit for purchases made before Dec. 1, 2009. Then Congress passed a second law, the Worker, Home-ownership and Business Assistance Act of 2009, which extended the deadline to April 30 and added a $6,500 credit for repeat home buyers. Buyers had to close their deal by June 30. But a Senate bill that included the extension failed to secure enough votes last week and has been shelved.

The National Association of Realtor said that as many as 180,000 contracts that were signed by April 30 might miss the June 30 closing deadline. But it is unclear how many of those sales won't happen as a result of missing the tax credit.

New York’s Sales Tax on clothes to Close Budget

New York's leaders are studying the sales tax on clothing and other taxes and fees to balance a budget they are still drawing up, after failing to meet an April 1 deadline according to the Associated Press.

Two state officials said one of the so-called "revenue raisers" under discussion would increase the state's 4 percent sales tax on clothing. One of the officials said the proposal includes three or four tax-free clothes shopping periods each year, including before school begins in the fall and at the December holidays. Purchases of footwear and clothing under $110 are currently exempt. The officials spoke on the condition of anonymity because of the sensitivity of the talks.

Democratic Gov. David Paterson told reporters two specific taxing ideas increases in the rate on online reservations and rental cars weren't under discussion, but when asked if a clothing sales tax proposal was being discussed he said he wouldn't comment on ideas "piece by piece."

Legislative leaders will soon brief rank-and-file lawmakers on details of the talks. Lawmakers would be forced then to accept Paterson's budget provisions as part of an emergency spending bill or shut down government. The budget so far includes raising the cigarette tax to the highest in the nation. In addition, Paterson's proposal to cap all local property taxes among the nations highest appears unlikely at this point.

Cigarette Tax Hike in New York is good for Public Health

Cigarette taxes in New York would jump by $1.60 a pack under a tentative deal reached between Gov. David A. Paterson and legislative leaders, which would give New York the nation’s highest state cigarette taxes.

The average price in New York City, which imposes its own cigarette taxes, will be even higher, nearly $11 a pack. Those who prefer other tobacco products will also be forced to pay significantly more. The tax on smokeless tobacco will more than double, to $2 an ounce from 96 cents an ounce, starting on Aug. 1. And the wholesale tax on cigars, dips and other kinds of tobacco will rise to 75 percent from 46 percent.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past.

The proposal would generate $440 million in revenue this year, helping close a state budget gap estimated at over $9 billion. But it is unclear whether there are enough votes to approve the plan in the State Senate, where Republicans have threatened to vote against any emergency budget bill that includes tax increases and some Democrats oppose efforts to collect taxes on cigarettes sold by the tribes.

“I think it’s wonderful,” said Peter Slocum, an official with the American Cancer Society. “Increased cigarette taxes have been one of the major successful public health interventions in the last decade in driving smoking rates to record lows in New York City and a lot of other parts of the country, too.”

Oil and Gas Industry Debated on Tax Break

The oil and gas industry measure by Senator Bernie Sanders, a Vermont independent, failed to muster even a simple 51-vote majority, although 60 votes were needed to pass it.

It was offered as an amendment to a bill that would extend unemployment insurance for hundreds of thousands of jobless workers whose benefits ran out last month and also renew a set of popular business tax breaks. The bill faces a key procedural vote on Wednesday, but it appears doubtful that Democratic leaders will be able to muster the 60 votes needed to advance the bill to a final vote.

Only 35 senators backed the Sanders' amendment as a number of Democrats joined the Republican opposition to defeat it. Sanders argued that big oil companies making billions in profits do not deserve the tax breaks at a time when the nation is facing record budget deficits and rising debt.

"With a record-breaking $13 trillion national debt and an unsustainable federal deficit, the last thing we should be doing is giving tax breaks to oil and gas companies that have been making enormous profits," Sanders said.

Opponents argued that removing the breaks for oil and gas drilling would hurt small producers as well as big oil companies. Meanwhile, the Senate passed a measure offered by Democratic Senator Al Franken that would establish a homeowner’s advocate office to help people having problems getting mortgages adjusted in the Home Affordable Modification Program.

The tax extenders bill would add about $80 billion to the deficit over 10 years, according to the Congressional Budget Office. The bill's $126 billion in spending would be offset in part by the increase in taxes on investment fund managers. The so-called carried interest proposal would have fund managers pay the ordinary income tax rate of 35 percent on a majority of earnings from managing investors' money. They now pay a 15 percent capital gains tax rate on those earnings.

The Senate bill would tax 65 percent of fund managers' income at the higher rate. A tougher version passed by the House of Representatives would tax 75 percent at ordinary income rates.