Caught an article in our local Arizona Republic, noting that "loopholes" in our tax system forgo the collection of $10 billion annually, greater than the entire state budget.
"People don't pay state sales tax on a host of goods, including horse vitamins and motion picture equipment. They also don't pay a tax on services, such as haircuts and massages", according to the article, by a reporter that I usually respect.
My first thought was that a tax on services (Arizona, and most states, do not tax services) would require me to tax my clients for the janitorial service we provide, adding 7.3% to their monthly bill. In looking at the pricing differential that convinces many prospects to choose another service, or to keep the office cleaning in-house, I strongly suspect that that increase would would convince many of my clients, and of everyone else's clients, to cancel service and take the work in-house. As a rule, clients have much less experience, and industry knowledge, in areas of "cleaning for health", or safety, or environmental concerns, so moving a large chunk of commercial janitorial work out of the hands of the professionals would lead directly to less desirable health, safety and environmental results.
Tax policy does have the occasional unintended consequence.
A couple other points I noticed:
Of that $10 billion, about $3.5 billion is in exemptions - "loopholes" - for goods not currently taxed, according to the article "often at the urging of lobbyists. They are either egregious examples of special treatment or well-reasoned exemptions to taxation, depending on political and fiscal views." Got me to wondering if we really could collect $3.5 billion on things like "horses' vitamins and motion picture equipment". Also mentioned was food sold at rodeos, surely a huge potential revenue source.
Only deep into the article was a mention made of the general food tax exemption, which, if you run the figures, turns out to be better than a quarter of that $3.5 billion. I guess the groceries exemption would be an example of the evil lobby put together by folks who buy groceries. Not mentioned is the huge potential revenue stream possible by taxing real estate purchases. This would be a good time to initiate that tax - not much property is selling locally, so folks would have time to adjust before they're likely to buy.
One also wonders how much of the remaining $6.5 billion, not currently collected on services, would really be available by taxing "such as haircuts and massages". Had the article really wanted to explore the realities of the "close the loopholes" proposal, it might have mentioned taxing financial services, legal services, education, and health care (everything from doctor visits to surgery) - surely larger sources of revenue than haircuts and massages. Wonder if anybody would mind.
One man's tax loophole is another man's heart surgery.