States Eye Excise Taxes, Transaction Fees as Revenue Raising Tactic

More states are successfully raising new revenue through excise taxes, transaction fees, and other workarounds amenable to courts when income or other direct tax increases are nonstarters.

Washington’s limitation on graduated income taxes, California’s requirement that new taxes win a two-thirds margin in the assembly, and Colorado’s requirement that nearly all new revenue proposals receive voter approval are among limits policymakers face. However, creative legislation has received support and passed judicial scrutiny.

As states find ways to generate revenue from transaction fees and taxes that sidestep legal and constitutional barriers, the alternative of a hike in direct tax on income ...