I wasn’t too politically thoughtful in the late 1980s, but I remember the cuts that Proposition 2 1/2 brought on. Gary’s comments on the push to tax legal services led me to do a LexisNexis search. I associated the tax on services with Dukakis. He certainly supported the idea, but lawyers and accountants seem to have shot it down.
Taxing services was evidently done to some degree across the country. From the Globe, July 10, 1990:
States could simply increase the sales tax on food, manufactured items and other tangible goods. But Ron Schreiner, South Dakota’s secretary of revenue, said the problem is that revenues from such taxes are dropping dramatically as the national economy shifts from producing goods to providing services. In 1970, Schreiner added, 70 percent of US economic output was in goods and 30 percent in services, but current trends suggest that by the year 2000 those percentages will be reversed.
New Mexico and Hawaii made their adjustments more than 30 years ago by imposing taxes on an array of business and professional services. South Dakota followed suit in 1965. A narrower range of services is taxed in Arkansas, Connecticut, Delaware, Maine, Minnesota, Nebraska, Texas, West Virginia and Washington, D.C.
The taxes range from Texas’ 6 percent fee on land surveys to New Mexico’s 5.75 percent tax on lawyers, architects and almost everyone else providing any service, to Delaware’s .4 percent levy on a narrower range of services.
The 5 percent Bay State tax will cover legal, accounting, engineering and architectural fees exceeding $ 20,000 a year for businesses. Also covered are hundreds of other services used by businesses and the public, from detective services to theater tickets costing more than $ 30 to computer repairs.
Sales taxes on services are fairer than on goods because poor people spend a higher share of their income on goods while the rich spend more on services, said Caroline Lindberg of the New Mexico Taxation and Revenue Department. Taxing services also is fairer to businesses, said Hovey, who asked: “Why should ChemLawn get a break because it’s a service when a sales tax is applied to fertilizer you buy in the store?”
Who Opposed the Tax on Professional Services?
In the first legal challenge to the tax on professional services, the Boston Bar Association and the Massachusetts Bar Association filed a joint lawsuit yesterday and vowed to take the fight to the US Supreme Court.
Several other groups, including the Massachusetts Society of Certified Public Accountants and the Massachusetts Taxpayers Foundation, are expected to file suits as early as Monday in opposition to the 5 percent tax on professional services effective Dec. 1.
Another interesting tax was taxing ad agencies.
Advertising executives opposed to a proposed 5% sales tax on advertising in Massachusetts will meet Wednesday to discuss possible responses to the measure. Giardini/Russell Group president Richard Warren said. Warren also heads the legislative committee of the Advertising Club of Greater Boston. The bill, filed May 19 by Sen. Salvatore Albano, would tack the 5% tax onto invoices submitted by agencies to clients
.
