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The Bagel Tax and other Mind Blowing Tax Programs

With the start of the fiscal last July 1, expect your pocketbook to get thinner and thinner. If you’re also a smoker, own a car or shop online, be prepared to spend more. Add to those weird taxes that will try to cut on your hard-earned cash. This is going to be another difficult year, folks.

Minnesota has already led the pack in increasing sales tax this year. A 6.875 percent tax will now apply to digital shopping which includes e-books, songs, photos, movies, and all other online downloads. Iowa is following suit with 6 percent sales tax. In Maine, a five percent Internet tax is due to take effect in 90 days after the legislative session ends.

On a national level, the Marketplace Fairness Act (MFA) is now pending action in the House. This act would enforce sales tax on all online purchases across all states. The new online tax will add billions of dollars in state revenue for the next few years.

On the other hand, smokers will also feel tax hikes in the following months. Minnesota is doubling its tax on cigarettes from $1.23 to $2.83 per pack. Smokers will have to pay more to maintain their habit or decrease their daily packets, which is not entirely a bad thing. New York is also putting a pressure on smokers with its $4.35 a pack tax. California is also set to raise cigarette tax by $2 in the following months. A nationwide tobacco tax is also being proposed by President Obama.

It is difficult to see the benefits of this increase in state taxes, but what do you really get from it? For one, federal programs such as Medicare and Social Security are funded by taxpayers’ dollars. Tax raises add to the overall revenue which funds the programs stated above.

The increase in cigarette taxes and the possible nationwide tobacco tax will also force smokers to go easy on their daily packs. One million deaths are smoke-related and will be easily avoided if smoking is moderated. It will also discourage 2.3 million kids to take up smoking according to a study by TobaccoFreeKids.org. Sin taxes were created for a purpose.

The government is also looking to increase revenue from several “weird’ taxes. New Yorkers who love to breakfast on bagels will have to pay a little bit more to have them sliced. The state imposes an 8 cent-tax to all “altered” bagels. Altered can mean sliced or served with butter.

“Cut bagels cross the line and become a prepared meal or food sold for on-premises consumption, which is taxable,” says Carla Yrjanson, vice president of tax research and content for Thomson Reuters. “Uncut bagels are typically sold for home consumption and would meet the definition of a (tax) exempt food in New York.”

Just like businesses, states are getting creative in looking for sources of revenue. Illinois charges a 5% tax on candy on top of the state’s 1% food tax. However, candies containing flour are exempted. Apparently, the added flour differentiates candy from food. Since the tax was implemented in 2009, the tax brought $35-$41 million in revenue to the state according to Susan Hofer, a spokeswoman for the Illinois Department of Revenue.

At the end of the day you as a consumer control how you spend money and contribute to tax. Every purchase means additional revenue for the state and the nation, aside from payroll taxes. The worsening economy, coupled with increasing taxes, opens a window of opportunity for you to explore creative ways to earn. Explore online businesses than can provide passive income for you and your family. Also, consider hiring a financial adviser to look into your bills and expenses. Being educated is the first step to understanding personal finance and taking advantage of opportunities.

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