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Upset for the Wrong Reason over New Jersey’s Sales Tax Hike

2 min readBy: Gerald Prante

New Jersey recently hiked its state sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. from 6 percent to 7 percent, yet on a positive note for good taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy, it also expanded the base to include imposing the sales tax on certain services that were previously tax-free. And as expected, those businesses whose items were previously tax-exempt are not happy. From the Daily Record:

The Morris County Park Commission wants the state to revoke the law that raised the sales tax 1 cent and applied it to golf club registration fees.

The commission also objected Tuesday to the sections of the law that require local governments to collect the tax and send it on to the state treasury department.

The state increased the sales tax in July by 1 cent to 7 cents in the 2007 state budget.

On Oct. 1, the sales tax was expanded to include some services that were not taxed previously, including tattoos, parking services, membership fees in health and fitness clubs, which include health programs at community centers, swimming pools, golf clubs and tennis facilities.

Regardless of one’s position on whether the state was right or not to raise the sales tax from 6 percent to 7 percent, no product or service should be exempt from the tax, even if it is golf membership fees or community health club fees. Merely because the good is not a tangible or durable good is no excuse for it to be exempt from a tax paid by most other goods and services.

Those seeking preferential treatment in New Jersey tax law should instead focus their attention on lowering the overall tax burden in New Jersey, which is in need of serious reform if you look at the recent State Business Tax Climate Index released today. Unfortunately, however, lowering the overall tax rates is typically a tougher sell to make to lawmakers, so instead we end up with a similar pattern to which we have at the federal level: high rates combined with tons of special provisions for certain lobbies or groups.