[taxabletalk] Russ: When a Fee Is a Tax

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Posted by Russ:
When a Fee Is a Tax
http://www.taxabletalk.com/posts/1250909590.shtml


   San Diego has had budget problems for many years. One step that San
   Diego used to balance its budget was ruled an illegal tax this pat
   week by a court.
   San Diego charges a collection fee on its business tax. The city says
   its to cover mailing and handling costs. Fees don't need approval by
   voters; taxes do. Two landlords filed a lawsuit claiming the fee was
   an illegal tax (the fee was never approved by San Diego voters).
   [1]The Court agreed with the landlords, noting:

     Whereas before the enactment of the Resolution a portion of the
     Business Tax proceeds were necessarily expended on the cost of
     administering the Business Tax program and collecting the tax, the
     imposition of the levy raised funds to pay for those costs, thereby
     permitting all of the Business Tax proceeds to be deposited in the
     general fund for expenditure on any and all governmental purposes.
     Thus, in practical effect, the levy is an increase in the Business
     Tax and therefore an increase in a general tax.

   [2]The Tax Foundation filed an amicus curiae brief on the case, and
   they were pleased with the ruling.

     âSan Diego wanted more revenue. Rather than just going to voters,
     they chose to play this definitions game,â said Joseph Henchman,
     tax counsel for the Tax Foundation in Washington, D.C., which filed
     a brief in support of getting rid of the fee. âTo us, it's such an
     obvious issue of trying to mislabel something that is clearly a
     tax.â

References

   1. http://www3.signonsandiego.com/stories/2009/aug/18/bn18tax15267/
   2. http://www.taxfoundation.org/blog/show/25017.html