States Look for New Sources of Tax Revenues

Towing, tattooing and tanning all have something new in common -- the Ohio Legislature (search)'s laser-like focus on them as a new source of tax revenue.

State lawmakers are considering placing new taxes on those businesses in an effort to close a projected budget gap of $1.7 billion next year.

Already, the Ohio House has passed legislation to tax a laundry list of services that have never before been taxed. The Ohio Senate is still debating the new taxes.

"We don't think it's fair," said Andra Gillum, a dry cleaner whose company would feel the tax burden grow.

Gillum said taxing previously exempt services like dry cleaning is bad business.

"It's going to be a burden for small businesses, possibly lead to layoffs, business closings," she said.

Ohio state Rep. Mike Gilb (search) agrees, and stressed lawmakers are to blame for this fiscal mess, saying years of irresponsible spending got states in this hole in the first place.

"There's an addiction, as I like to call it, an addiction to state spending in Ohio, and until we overcome that addiction and decide that we don't need to fund as much as we are funding in regard to state services, we're going to have this problem in Ohio," Gilb said.

But supporters counter that the new taxes will be a boon to Ohio, bringing multimillions in needed revenue from a segment of the economy previously neglected -- the service industry. Among the targets under consideration for new taxes -- farm equipment, health club fees, wheelchairs and tattoos.

"Any time you increase taxes, it's, 'Why don't you increase someone else's taxes?'" said Ohio state Rep. Chuck Calvert. "We've tried to be fair in the application of what we're trying to do right now."

Tax watchdogs say generally speaking, states have historically opted for more traditional approaches to address budget shortfalls, like slashing spending, dipping into rainy day funds and hiking the income tax rate.

"The fact that we're now at the point that states are actually considering tax increases or even broadening something like the general sales tax base, means states are down to their last options," said Arturo Perez of the National Conference of State Legislatures (search), which reports all 50 states have a combined projected budget shortfall next year of $53.5 billion.

Nine states this year have actively considered new taxes on goods and services. Their decisions are greatly influenced by the fact that 49 states by law must pass a balanced budget.

"I understand that the state is in a difficult time, but I think this is a short-term fix," Gillum said.

She added that states should tax last and rein in spending first so that small businesses like hers don't get taken to the cleaners.

Fox News' Jeff Goldblatt contributed to this report.