SIN TAXES GET CLOSER LOOK

States Mull Obtaining Funds From Such Things As Pot, Prostitution

In his 11 years in the Washington Legislature, Rep. Mark Miloscia
says he has supported all manner of methods to fill the state's
coffers, from increasing fees on property owners to help the homeless
to taxes on alcohol and cigarettes, most of which, he said, passed
"without a peep."

And so it was last month that Miloscia, a Democrat, decided he might
try to "find a new tax source" - pornography.

The response, however, was a turn-off.

"People came down on me like a ton of bricks," said Miloscia, who
proposed an 18.5 percent sales tax on everything from sex toys to
adult magazines. "I didn't quite understand. Apparently porn is right
up there with mom and apple pie."

Miloscia's proposal died at the committee level, but he is far from
the only legislator floating unorthodox ideas as more than two-thirds
of the states face budget shortfalls.

"The most common phrase you hear from the states is 'Everything is on
the table,"' said Arturo Perez, a fiscal analyst with National
Conference of State Legislatures who predicted the worst financial
year for states since the end of World War II.

Nowhere is that more true than California, where Tom Ammiano, a
freshman state assemblyman from San Francisco, made a proposal
intended to increase revenue, and, no doubt, appetite: legalizing and
taxing marijuana, a major - if technically illegal - crop in the state.

"We're all jonesing now for money," Ammiano said. "And there's this
enormous industry out there."

In Nevada, state Sen. Bob Coffin said he would introduce legislation
to tax the state's legal brothels, a fee that would be "based on the
amount of activities." And unlike the Washington porn proposal, which
drew the ire of the adult entertainment industry, Coffin's plan has
the backing of the potential taxpayers, in this case brothel owners
who employ women as independent contractors.

"I think they figure if they become part of the tax stream, the less
vulnerable they will be to some shift in mores," he said.

Hawaiian legislators were also considering capitalizing on another
potential shift in public attitudes when they proposed legalizing
same-sex unions, which supporters say could help the slumping tourism trade.

In Massachusetts, meanwhile, state legislators have introduced a
proposal to build two resort-style casinos, including one in Boston.
A similar push died last year in the state's House of
Representatives. But Rep. Martin J. Walsh, a Dorchester Democrat who
co-authored the new casino bill, said a $2 billion budget deficit may
have changed some minds.

"Every state in the nation, including Massachusetts, needs to figure
out a way of raising revenues," Walsh said. "So we need to be creative."

Scott Pattison, executive director of the National Association of
State Budget Officers, said many lawmakers were loath to tap more
traditional tax sources during a downturn.

"What's pushing it is this incredible desire to raise revenue," he
said. "But it's coupled with the desire not to raise the general and
sales and income taxes."

Whether such proposals can pass is another issue, though each idea
has its supporters. Betty Yee, chairwoman of the California Board of
Equalization, the state's tax collector, said that legal marijuana
could raise nearly $1 billion per year via a $50-per-ounce fee
charged to retailers. An additional $400 million could be raised via
sales tax from marijuana sold to buyers.

The law would also establish a "smoking age" - 21 - effectively
putting marijuana in a similar regulatory class as alcohol or
tobacco. Marijuana advocates argue that legalization could also
decrease pressure on the state's overburdened prison system and
members of law enforcement.

All of which, Yee said, at least makes the proposal worth talking
about in a state with chronic budget problems and a law already on
the books allowing the medical use of the drug.

"We know the product is out there, and we know marijuana is available
to young people as well, but there's no regulatory structure in
place," Yee said. "I think it's an opportunity to begin the debate."

Such a debate, of course, does not always favor tax innovators, and
several law enforcement groups have already objected to the idea of
legal marijuana, which would conflict with federal law.