We've noted in the past that states try to levy taxes on many silly things. Literally. Maine taxes jugglers, comedians, and clowns for crying out loud. States also try to tax other things that simply don't make a lot of sense. It seems that legislators, rather than improve tax systems with reform, like complicate things with bad ideas. After all, it's the American way.
Today the Tax Foundation dug up an oldie but a goodie that is appropriate for All Hallow's Eve:
One website estimates that more than 750 million pumpkins are carved into jack o' lanterns each October. While the practice brings joy to many, it created heartburn for Iowa tax officials four years ago, who were dismayed that so many people were decorating their pumpkins.
You see, Iowa (like most states) taxes retail sales but exempts groceries. Pumpkins used for decoration should have been taxed but were slipping by because they were also food. So in 2007 they sent a bulletin to retailers, reminding them to quiz customers on whether they were buying the pumpkin to eat (not taxable) or decorate (taxable)[.]
Generally speaking, if the pumpkins were going to be used for carving jack-o-lanterns then they needed to be taxed. If they were going to be used for making any delicious pumpkin food items, then they were not to be taxed. This abysmal theory was rightly mocked by the Tax Foundation and Iowa officials kicked the tax to the curb just a few days later after the Internet got a hold of it. We asked resident Iowan and sensible tax hawk Joe Kristan about this one and he said, "Sometimes I think the department is just that strange, but sometimes they announce silly rules just to yank our chain."
Although common sense prevailed in this Halloween-related tax dilemma, candy confusion still exists in Washington state, which means savvy shoppers will be handing out Kit-Kats.