This is a rush transcript from "Hannity," February 16, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Over the past several months Americans have been hit with a deluge of unfamiliar taxes and fees as lawmakers from coast to coast try to offset economic hard times in new and, well, creative ways.

For instance, in Maine, sales taxes have been extended to car repairs and dry cleaning. A one percent tax on yoga classes is being now charged in Missouri. And in honor of Democratic governor Deval Patrick's Labrador retriever, a new tax being dubbed Toby's Law hits the bay state, by the way, which requires a $3 surcharge on municipal licensing fees for dog owners to pay for their pets.

Now if that one doesn't blow you away, well, this one will. Wyoming is considering putting a tax on wind. Not even food is saved from the government's reach.

Now get this. New Mexico is going to start taxing several food products ranging from — let see. We've white flour over here and tortillas and hard taco shells. And of course, we've got soda and candy — that's going to be taxed.

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In Arizona, the city of Phoenix, well, they're going to tax — let's see, your milk. Well, we've got milk right here. We got meat right here. We've got vegetables, they'll be taxed as well. That's in a salad right there.

The nation's capital has even started charging a bag tax. Five cents per each paper or plastic. I prefer plastic. I'm not environmentally concerned.

And of course, we can't forget the, you know, typical surge in sin taxes. Rhode Island, Connecticut, New Mexico each, they've raised cigarette taxes — hang on, got a pack of ciggies here — there by a dollar.

West Virginia is considering a beer tax increase — whoops, we got a bottle of beer right here. And by the way, at least eight other states are raising alcohol taxes. By the way even Massachusetts revoked the alcohol tax exemption driving many people to go over to the border to New Hampshire.

Why? Because they want cheaper booze. Including Democratic State Representative Michael Rodriguez in Massachusetts who voted for the state alcohol tax but now buys his booze in New Hampshire.

Now meanwhile a small northeast town is about to really feel the heat with a staggering 34 percent increase in property taxes while business owners in the Midwest are struggling from out-of-control unemployment taxes.

So what will they think of next?

Here with analysis is the host of "Varney and Company" on our sister network, the Fox Business Network, Stuart Varney, and former White House press secretary, Fox News contributor, Dana Perino.

Do any of you smoke?


HANNITY: Do any of you drink?



HANNITY: OK. Would you like a beer, Stuart?

STUART VARNEY, FOX BUSINESS NETWORK: It's all yours, Sean. It's all yours.


HANNITY: All right, I can give you the milk if you prefer.

PERINO: No thanks.


VARNEY: I'll take it. I'm lactose intolerant but who cares.


PERINO: That's too much information!

HANNITY: I could poisoned you with —

VARNEY: I'm joking.

HANNITY: All right, it's funny. They're taxing Gummy bears and Sour Patch kits. They're taxing food. You know these —

PERINO: People are getting nickeled and dimed to death. And I think they're classic cases — especially for states and localities. They overspend in the good times. They create new programs, they expand their entitlement programs, and then in the down times, they have no choice but to either cut spending or raise taxes.

And in some ways they come up with this cockamamie things. I love the things that they're going to tax yoga classes. Right? So, now you're going to have — there's a tax on personal hygiene.

HANNITY: You do yoga?

PERINO: A tax on yoga and a tax on the bags. So all I can imagine was those are like really stressed out people.


PERINO: Who are like carrying armfuls of groceries all over the place.

VARNEY: Everything is in front of you here. That what you're surrounded with, Sean, are items which we consume. They're all being taxed. This is a consumption tax at the state level. Wait for it, it's coming to the federal level. They have to gain money from some place. They can't tax income much more, it's going to be a consumption tax which means —

PERINO: Well, and this is not a tax on the rich.

VARNEY: No, no, no. This is for everybody.

PERINO: Right. This is a tax on everybody.

HANNITY: But isn't this a backdoor way? The sort of — you know, Barack Obama — I'm not going to raise taxes.


VARNEY: Of course.

HANNITY: By the way, he's agnostic now about his promise.

PERINO: Right.

VARNEY: Of course it is. It's going to be a value added tax like in Europe, but that's a hidden tax. A national sales tax, a gas tax, but it will be a tax on consumption which we all pay to raise massive amounts of money. It's going to have to happen. Here it comes.

Great American Blog: Will these taxes help or hurt the economy?

PERINO: President Obama has a serious problem. In a poll today — I think it was a CBS poll — only 12 percent of Americans believe that they got an income tax cut under President Obama's plan.

So — and the reason I think that they feel that way is because in their pocketbooks they are getting nickeled and dimed on all these other things.

HANNITY: It's almost like is the federal government and their economic policies are so bad it filters down to the states. The state coffers, they are suffering. They're running —

PERINO: Medicaid is a good example.

HANNITY: Massive deficits.

PERINO: And that's how you got the Nebraska deal for —

HANNITY: The cornhusker kickback.

PERINO: Yes, the cornhusker kickback.

VARNEY: The reason taxes on consumption are going up at state level is because the state cannot afford the lavish pensions which they promised to their retired state workers.

The reason you're going to get a consumption tax at the federal level is because we are spending up a storm, the treasury is empty, these deficits are growing, they are now a major political issue. They've got to get revenue from somewhere. They can't tax income any more. It's got to be consumption.

PERINO: I disagree. I don't think they're going to pass one this year.

HANNITY: Not this year.

VARNEY: It's coming. It's got to come.

PERINO: No, not this year —

HANNITY: Not this year because it's an election year.

PERINO: And not next year if Republicans do well in 2010.

VARNEY: I think we agree cap-and-trade is dead. Right? It's not going to happen.


VARNEY: Now built into the budget is the assumption that we do get cap-and-trade and we get $600 billion worth of revenue for the government out of it over the next 10 years. We're not going to get that $600 billion. We have to tax consumption to get it.

HANNITY: Let me look at this thing. California is near bankruptcy. New York — there's an article in the paper, in the New York Post, New York state tax revenues implode in the wake of taxing the wealthy.

New Jersey, The Star Ledger, residents fleeing, high tax New Jersey. They removed $70 billion in wealth from the state of New Jersey.

I mean, these states — so what they're going to do, the few people that are left, they're going to nickel and dime them of every penny loose — loose cent they have in their pockets?

VARNEY: You have to pay consumption taxes. It's not like income taxes which you can avoid by moving or by putting your income into a different year. You consume anything, it will be taxed.

HANNITY: Wait a minute. I got an example.

VARNEY: You pay that tax, you can't run.

HANNITY: In New York — now, I'm not a smoker. But somebody on my staff is answer and I offered him a deal to quit. OK, so this is about $10 a pack of cigarettes in New York. My father used to send me down to get him a pack, it was 50 cents in a machine when I was kid, not long ago, I'm a pretty young guy.

PERINO: Don't age yourself.

HANNITY: Thanks. No, but the point is, you know, people, how do they function if we're going to tax their food, their candy, their tortillas, their tacos —

PERINO: Well this is the thing that's really interesting to me as well. For example, they tax the cigarettes some more so that they can help pay for health care.

HANNITY: Yes, baloney.

PERINO: Right? But it doesn't go to the health care. So they're basically — they're putting up taxes on the very people that they're trying to help. The same on the green — on the bags. Right? This was supposed to be a green tax. That's baloney. It goes to other — it goes to the general fund and it doesn't do anything for the environment.

HANNITY: Stuart, I'm going to save you five cents the next time you go to the grocery store.

VARNEY: What a guy. What a guy, Sean.

PERINO: The next you know that the government will come in, they'll start, like, checking out your couch for —

VARNEY: But when do you hit the wall? That's the question.

HANNITY: But this is what the Tea Party movement is about. We're throwing tea in the harbor because people aren't taking it any more, are they?

VARNEY: Right. Right.


VARNEY: Now it's obvious. It is obvious. Everything is being taxed. Income, consumption, you name it, it's taxed. We're going to hit the wall at some point, soon, I believe.

HANNITY: Dana, last word?

PERINO: I'm speechless.



VARNEY: You agree with me.

PERINO: I'll take those with me.

HANNITY: Take the beer and the wine. You're all set.


VARNEY: Have a good night.

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