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Wednesday, October 31, 2007

THE GREAT IOWA PUMPKIN CAPER 

THE GREAT IOWA PUMPKIN CAPER

Now that the excitement and activities of Halloween are past, I would like to share some thoughts about the GREAT IOWA PUMPKIN CAPER, and its national implications.

Over the past few days, Iowa has been the subject of many humorous comments from television and newspaper commentators and pundits, internet news sites, and bloggers of every stripe. Usually, comments about Iowa are limited to the Caucus season, or have to do with our rural background. We have come to expect that, and quietly continue to provide our children with an educational system that is consistently ranked in the top four of the fifty states, a crime rate that is infinitesimal compared to most states, and an agricultural system that not only feeds the Nation, but provides foodstuffs to the world. From a personal standpoint, I am rarely embarrassed to say that although a Chicago native, I have happily lived in Iowa for more than nineteen years, and continue to do so even though now retired.

However, what I and many of my neighbors and friends are calling the Pumpkin Caper is not only an embarrassment, but is an indicator of a new governmental program that may portend issues of concern to all of us. I can think of no other way to describe this other than to call it a stealth tax that could be applied many other products and services, both at a state level, and a national level.

The short version is that Iowa is now charging sales tax on pumpkins. That this happened in an agricultural state is the reason for the recent surge of media comments. How this happened should be a fair warning to us all.

The news stories have the basic story wrong when they call it a new tax. It is not a new tax passed by our state legislature and signed into law by our governor. Rather, it is based on a decision by those nameless and faceless government bureaucrats who are answerable to no one.

Like many states, Iowa does not levy a sales tax on food. Therefore, most farm produce is sold tax free. However, in a secretive move not covered by any oversight, and not noted or reported on by any local media, the Iowa Department of Agriculture, in conjunction with the Department of Revenue, reclassified pumpkins from an agricultural product to a decoration. As a decoration, pumpkins are now subject to the state sales tax. This action was taken under the radar, by two department heads appointed by our newly elected Democratic governor. A new tax, without any legislative action.

I want you to take a moment to consider the implications of this action. The state has opened a new source of revenue by simply reclassifying a product. If we want to avoid paying sales tax, we must request a tax exemption form, and certify that the pumpkin will be used for food, and not as a decoration. Most retailers were not aware of this tax change until after the Halloween season was upon us, and most pumpkins sold. They must now pay the tax out of their own revenue, putting a strain on the small grocers who have a limited income already. Does this mean that if I hang some leftover ears of sweet corn from my door for Thanksgiving, that the Department of revenue will knock on my door demanding that I pay a tax on them, because of its use as a decoration? How about if my grandson carved the pumpkin, but my wife then baked the seeds as a treat for him? Is this dual use, requiring a different form. I don’t know, because this entire process was completed in secret.

With national elections looming, and so many candidates already talking about instituting new taxes, or allowing previously passed tax cuts to expire, will this strategy expand to other states or federal taxes. Can other states or the Federal government increase our taxes by reclassifying certain products and services? Can other Governors and a new President, with their own appointees in place, use the process of product classification to increase their revenues without any opportunity for either the electorate or our representatives to consider the issue? You may think not, but are you willing to bet your spendable income on it?

While you may consider me an alarmist, I would ask that you read the wording of the original Stamp Act put in place by the British Government when we were still a colony, and then remember what stimulated the patriots who fought for our independence. Their first battle cry was “No Taxation Without Representation”.

UPDATE

A little light can often cure a multitude of ailments. And embarrassment can even work on our politicos, even in today’s liberal environment.

The good news is that the Governor of Iowa has suspended implementation of the pumpkin sales tax, and advised the Iowa Department of Revenue to refund the tax monies already collected.

The bad news is that the classification of pumpkins as a decoration rather than an agricultural product was suspended, not rescinded, as the media reported. That means the process and the classification remains in place, and can be reinstated by executive order, again without legislative oversight. In addition, as a test application, the use of product classification to change tax status was a success, and can be applied to many other products and services in the future to enhance governmental revenues. And not just in Iowa, but at state and Federal levels. I am confident that this is not the last we have seen of the use of a stealth tax.



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