At the turn of the twentieth century the tax code was only 400 pages long—about the length of the third Harry Potter book. However, since then it has grown to be 187 times longer to a monstrous 74,608 pages. The majority of that growth has occurred in the last 30 years, and if it continues at this rate the tax code will exceed 100,000 pages by 2050. This not only illustrates the mounting weight of the federal tax burden, but the subsequent increase in control the nanny state IRS has over the economic behavior of all Americans.
On top of the complex and overreaching federal tax code, each state has its own unique set of tax laws. Many of these nuances force business owners to raise prices on confused, unhappy consumers.
Take the New York “bagel tax,” for example. The Empire State is known for its delicious bagels, but if bakery goers want it sliced, toasted or with toppings it will cost a little extra. Thanks to the fine print in New York’s tax code, those are the differences between a bakery item and a restaurant item. Only the latter is subject to the state’s 4 percent sales tax, as well as local taxes that can add up to almost 9 percent in some areas.
In a recent post, Stateline highlighted many of these unusual state taxes that perplex taxpayers across the country. Illinois offers a prime case of the discriminatory nature of these hair-splitting taxes. According to the Streamlined State and Use Tax Agreement that attempts to standardize sales taxes nationwide, the difference between candy and cookies or cakes is whether or not the product contains flour. So when Illinois raised the state candy tax from 1 percent to 6.25 percent in 2009, Kit-Kats, Milky Ways, and other flour-containing candy bars were exempt from the exorbitant candy tax hike while other products sold in the same aisle were not.
Beer-drinkers in Kansas encounter puzzling obstacles similar to those of candy-eaters in Illinois. The Sunflower State allows beer containing alcohol content of 3.2 percent or less to be sold in grocery stores. This beer, however, is subject to the state’s 6.5 percent sales tax as well as local tax, which averages a total of 8.4 percent combined tax. Regular beer with higher alcohol content, on the other hand, is exclusively sold in liquor stores and not subject to the same sales tax. An 8 percent liquor enforcement tax is imposed instead, which is on average a lower tax than that levied on these low alcohol content beers.
“There are many strange quirks in the tax system,” said Kansas Department of Revenue spokeswoman Jeannine Koranda in reference to this strange contradiction.
These “quirks” are actually costly burdens on taxpayers that represent a larger problem plaguing the current tax system. Pedantic complications in both the federal and state tax codes have become so numerous that the laws are now used to steer consumption and limit choice. Be it bagels, candy or beer, anomalies in the tax code not only impose undue regulation but make compliance difficult for taxpayers and business owners.