Some of the most substantial deductions in the federal tax code are the itemized deductions for state and local income, sales, and real estate taxes. This map shows the variation, by county, in the amounts of...
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- Which States Tax Celebrations of Independence from Taxati...
Which States Tax Celebrations of Independence from Taxation?
One of the Tax Foundation's principles of sound tax policy is neutrality, which states that since taxes pay for general public services enjoyed by everyone, they should be levied broadly rather than on a group of people who happen to purchase a particular product or service. The fundamental purpose of taxes is to raise necessary revenue for programs, not to micromanage a complex market economy with subsidies and penalties. High taxes on certain goods only distort economic activity. Put another way, the principle of neutrality says that high tax rates on specific goods or services are simply unfair.
The Fourth of July is in part a celebration of independence from unfair taxation, so how ironic would it be for governments to apply unfairly high taxes to items used in Independence Day celebrations? Well, that's exactly what some states do.
Cleburne County, Alabama, levies an 8 percent tax on fireworks:
The net proceeds of the first two cents ($.02) per one dollar ($1) gross sales of any such tax levied and collected shall be distributed equally among the volunteer fire departments located in the county. The remaining net proceeds shall be paid to the county general fund.
Firefighters serve all the members of a community, so it would be more fair to fund fire departments with taxes that are levied on everyone, not simply on those who purchase fireworks.
West Virginia store owners must pay (and probably pass on to the consumer) a "Sparkler and Novelty Registration Fee" in order to sell sparklers and novelties. (We wonder whose job it is to decide what qualifies as a "novelty." Just imagine the desks in the WV Department of Revenue covered with sparkers, glow worms, and noisemakers as weary government officials test them to determine which items are sufficiently novel or sparkly to merit a special fee.) While fireworks are illegal in the state, this annual fee applies to a detailed list of items often used at holiday celebrations, especially the Fourth of July. They include the following (from the West Virginia Tax Department):
- Wire sparkler consisting of wire or stick coated with a nonexplosive pyrotechnic mixture of 100 grams or less per item, that produces a shower of sparks upon ignition
- Snake and glow worms composed of pressed pellets of a pyrotechnic mixture that produce a snake-like ash when burning
- Trick noisemakers which produce a small report designed to surprise the user
- Other sparkling devices which emit showers of sparks and sometimes a whistling or crackling effect when burning, do not detonate or explode, are hand-held or ground-based, cannot propel themselves through the air and contain not more than 75 grams of chemical compound per tube, or not more than a total of 200 grams if multiple tubes are used
And in Texas, people buying fireworks must pay a 2 percent tax to support volunteer fire departments.
Something for Fourth of July revelers to contemplate as they enjoy their fireworks and sparklers.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.