Lunch Links: Jock Tax Refunds, Japan Delays Sales Tax, History of the Oleomargarine Excise Tax

May 31, 2016

Today is May 31, the date in 1904 when the U.S. Supreme Court decided McCray v. United States, upholding an excise tax that had the real purpose of discouraging the purchase of one product to benefit a competitor. Dairy farmers successfully lobbied Congress to impose a hefty tax on margarine, an oil-based yellow-colored imitation butter that proved to be quite popular with consumers due to being cheaper. Margarine producers objected to the law, saying the purpose of the tax was to suppress their product, not raise revenue. The Court conceded that such a purpose would be unconstitutional, and that the Court must look at the effects of the tax and not just the words of the statute, but upheld the tax as an exercise of judicial deference to the elected branches: “the motive or purpose of Congress in adopting the acts may not be inquired into.” Three justices dissented. (The oleomargarine excise tax was repealed during World War II rationing, and since then, margarine has outsold butter.)

Here are some interesting links I came across:

  • Settlement Between NHL Players, Tennessee Latest Setback for Odd “Jock Taxes”: Tennessee has agreed to refund $3.32 million collected from athletes playing in the state. The tax money collected from out-of-state players went to the Memphis Grizzlies and Nashville Predators. A similar lawsuit involving NBA players is pending. (Washington Post)
  • Task Force Eyes Changes to Louisiana’s Complex and Flawed Sales Tax System: A 13-member panel is preparing recommendations to overhaul the sales tax for next year. (Disclosure: TF economist Scott Drenkard is one of the members.) (New Orleans Advocate)
  • Florida Supreme Court Upholds Tax on Flowers Sold Out of State: The taxpayer argued that they must pay tax in states where it was delivered, and Florida’s use of “origin sourcing” for its tax caused double taxation and discriminated against interstate commerce. The Court held that while it might be double taxation, the tax is internally consistent (wouldn’t cause discrimination if every state did it) and constitutional. (Justia / Florida Supreme Court)
  • California Film Incentives No Longer Going to Indie Productions: Supporters of film tax credits like to talk about how the subsidies support small and independent productions, but indie producers in California are crying foul as their share of the money plummeted from 60 percent to 9 percent. (
  • Japan to Delay Sales Tax Increase as Abenomics Sputters: The increase from 8 to 10 percent, scheduled to go into effect in April 2017, will now take effect in October 2019. (Reuters)
  • An Objective Look at Pennsylvania’s Tax Burden: More coverage of our new Pennsylvania chart book. (WHTM-ABC)

And be sure to listen to my interview with KJZZ Arizona radio on a potential marijuana tax in Arizona.

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