Photo of the day

From the Telegraph’s photos of the week.  As you know, I love hot air balloon photos, but I don’t think I’ve ever seen one in winter:

Hot air balloons fly over the famous volcanic rock formations during the winter season in Cappadocia, a historical region in central Anatolia in Nevsehir, Turkey

Hot air balloons fly over the snow-covered volcanic rock formations of Cappadocia in central TurkeyPicture: Anadolu Agency

The tampon tax and the devilish details of “simple” policy

I first learned about the “tampon tax” last semester when some students directed me to a post about how feminine hygiene products all over the country were being taxes as a “luxury good.”  What??!  Oh, don’t you love click-bait internet headlines.  Well, in many states the sales tax code has exemptions for necessities– typically food and clothing– and then every thing else is, in this bureaucratic sales tax language a “luxury good.”  That’s obviously not the common usage, as nobody sees toothpaste or toilet paper or Advil or whatever as luxuries.  In short, most states do not carve out an exemption for feminine hygiene products, much like they don’t carve out an exemption for most drug store health items like OTC medicine, bandages, etc.  It’s a little ridiculous to portray this as sexism.  Now, if the whole HBA section of the store was tax exempt except for tampons and pads, then we’d be onto something.  But that’s not the case.

Anyway, a movement to repeal this “tampon tax” is catching on, but, as with so many things, the devil is in the details.  Very nice piece on the matter in the Upshot:

“It’d be nice if necessities weren’t taxed, but necessity is subjective,” says Joseph Henchman, who oversees state policy for the Tax Foundation, a conservative think tank that generally opposes sales tax exemptions. He notes that the nuanced arguments about what constitutes necessity have often led to very complicated sales tax rules.

For example, the idea of exempting groceries from sales tax sounds simple enough, but most states want to continue collecting taxes on takeout and other prepared foods, on the grounds that having someone else cook for you is a luxury.

As a result, they need to lay out rules explaining what is, and is not, a prepared food.

So in 2010, Wisconsin’s revenue department released a 1,400-word memo titled “Sales of Ice Cream Cakes and Similar Items.” As the memo describes, sometimes an ice cream cake in Wisconsin is a tax-free baked good; in other cases, it’s a taxable prepared food. The question hinges on several factors, including the size of the cake, who decorated the cake, whether a majority of the cake’s layers contain flour and whether the seller provides utensils along with the cake…

Complex definitions have also driven repeated changes in the taxation of tampons in at least one state. In 1990, the Illinois Supreme Court ruledtampons met that state’s definition of a “medical appliance” and thus deserved a tax exemption then being withheld by the city of Chicago, but the state subsequently narrowed the exemption, and tampons are taxed at the full rate again.

Unlike Illinois, most states restrict their tax exemptions for consumer medical products to prescription drugs. This may seem like an odd distinction (why does a prescription painkiller deserve better tax treatment than Advil?), but you can see why other states make it when you read Illinois’s seven-page regulation setting out the new, tampon-exclusive definition of “medication” and “medical appliance.”

It turns out, it’s surprisingly hard to define the place where toiletries end and medication begins. Unlike most states, Illinois needs a rule saying that medicated lip balm is not medication, and neither is dandruff shampoo — not even the kind that smells like an industrial byproduct.

The California bill proposed by Ms. Garcia, a Democrat, and Ling Ling Chang, a Republican colleague, avoids this ambiguity by simply creating an exemption for “sanitary napkins and tampons,” rather than a broad category of necessary medical or personal care products. Still, it would be added to a list of over 100 existing exemptions to the state’s sales tax.

Mr. Henchman noted one other reason to be wary of a tampon tax break: Sales taxes that exclude necessities and services tend to end up relying heavily on restaurant meals and durables like electronics and furniture, which are categories of spending that consumers cut back on when the economy weakens. This makes sales tax receipts more volatile, worsening the budget crises that arise in recessions.

Of course tampons are a necessity.  But so are soap and toilet paper (and I would argue a good number of additional HBA products).  Once you start carving out exceptions on an item by item basis, where does it stop?  Yes, sales taxes are regressive, but right now they are an important part of state revenue and if state income taxes are not going to be going up (they’re not), we need to be careful with eating further into this tax base.  As discussed more extensively elsewhere in the piece, as painful as it is, we really need to be expanding the tax on services such as auto repair, veterinary care, etc.

Anyway, maybe we should stop taxing tampons.  Maybe we shouldn’t.  What I do know is that public policy does not benefit from facile debates over complex issues.

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