THE TOP 10 STUPID TAXES-II
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4. 1995: Illegal drug tax (USA)
On January 1 2005, Tennessee joined 23 other states in imposing a tax for possession of illegal drugs. People who bought drugs had 48 hours to approach the Department of Revenue and pay tax. It was levied per gram – $3.50 for marijuana, $50 for cocaine, and $200 for meth and crack cocaine.
Drug buyers did not need to provide identification to pay the tax and it was illegal for revenue employees to report them. In just 18 months, Tennessee has collected nearly $2.7 million in revenue – although it is thought this came mainly from drug users who were arrested and found not to have paid the tax.
In July 2006, a judge decided the tax was unconstitutional and it was scrapped.
5. 1988: Removal of Mortgage Interest Relief
This was partly precipitated by a blunder by the then Chancellor, Nigel Lawson. In his budget, he announced that in less than five months time, he was ending double mortgage interest tax relief, which was a major subsidy to mortgage borrowers at the time.
This led to a surge of people buying a home to take advantage of the tax relief. One year later and interest rates had almost doubled to 15 per cent, crippling homeowners and leaving many facing repossession.
6. Late 1970s: The 98 per cent tax rate
During this period there was a 60 per cent top rate income tax and then an “investment income surcharge” of a further 15 per cent. There was no incentive to increase profits because virtually everything was taxed. It led to high levels of non-compliance and lots of avoidance, and was abolished by Nigel Lawson in 1984.
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