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The state legislature in Ohio continues hearings today on a new budget with some interesting tax ideas. Gov. John Kasich’s (R) proposal cuts income taxes and it lowers the sales tax. But there’s a catch: It levies sales taxes on a big list of services for the first time.
Here’s a partial list of the services that could get hit with a 5 percent sales tax: coin-operated laundry, dating services, investment counseling, online downloads, movie tickets, funeral services, and haircuts.
Demetrius Williams, who runs Ambitions Barber Shop in Cleveland, is no fan of this idea. He says some of his customers complain they’re already paying too much for their kids’ haircuts.
“They say, ‘Hey how much is a haircut?’ And you tell them $10, it’s like, ‘Woah, $10? For a child? He doesn’t have $10 worth of hair.'”
Most policy experts support the idea of taxing services. Zach Schiller, at liberal think tank Policy Matters Ohio, says if you want to keep state governments running, you’ve got to do it. But he has a big problem with the governor’s plan to cut income taxes 20 percent. He says that unfairly favors the wealthy.
“The people in the top 1 percent will receive, on average, more than $10,000 a year in a tax cut. People in the bottom fifth will on average pay $63.”
Schiller says Ohio should tax the wealthy more, not less. According to Schiller, state funds have been cut back in the past few years for local government and social services. He says right now, what low-income people really need is tax relief.
“If we go ahead and start taxing movie tickets and haircuts and so on-low-income people who can least afford it, we should take steps to protect them.”
State tax commissioner Joe Testa says many of the services that would be newly taxed are professional services used by wealthier people.
“We’re talking about hiring lawyers and accountants and engineers and architects, and markerters.”
Testa says Ohio’s been moving down this road for decades.
“Two-thirds of all consumption is services as opposed to goods. Whereas back when sales tax was started, back in the ’30s, it was almost the opposite.”
Hawaii and New Mexico already tax more than one hundred services. Several states, including Louisiana and Minnesota, have floated their own service tax ideas. Experts say this shift has been a long time coming.
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