A BLOOD-RED-HERRING: WHY REVENUE CONCERNS ARE OVERESTIMATED IN THE FIGHT TO END THE "TAMPON TAX".

• Author: Herman, Suzanne

Introduction 596 I. Where We Stand in the Fight for Menstrual Equity 597 A. What We Tax Signals What We Value 597 B. Introducing the Tampon Tax 600 C. The Tampon Tax Abroad 603 II. Why Does the Tampon Tax Still Exist? 605 A. The "Unfairness" Argument 606 B. The "Not a Priority" Argument 608 C. Revenue Building 609 III. Lifting the Veil of Institutional Ignorance 613 A. Institutional Ignorance 613 B. Menstrual Equity and COVID-19 616 C. Coalition Building 620 D. A Youth-Lead Movement 622 Conclusion 624 INTRODUCTION

Thirty states imposed a retail sales tax on menstrual products in 2020. (1) This number is down from 40 in only the last five years. (2) The various ways states exempted menstrual products and their motivations for doing so make the "tampon tax" an outlier in state sales tax and budget policy. (3) A unique combination of mainstream revenue-building and anti-women (4) lawmaking created an inequitable tax, but reformers brought about a sea change using other unique combinations: bipartisan support for exemption resulted in unlikely political allies; (5) youth-lead internet campaigns created noise around, of all topics, sales tax; (6) threats of litigation showed state legislatures that the tampon tax may be worth more dead than alive; (7) and in the wake of the COVID-19 pandemic, the U.S. government changed its tune on whether menstrual products are "necessities." (8) Overall, the menstrual equity movement is seeing significant progress for the first time in nearly a decade. (9) As knowledge of the issue increases, revenue justifications for taxing menstrual products appear flimsy. Under stricter scrutiny from legislatures, policy makers, and the general public, the sales tax on menstrual products cannot stand.

This Note describes the tax on menstrual products as it currently exists in the United States, focusing on how recent changes have laid the foundation for total repeal. Part I provides relevant background on retails sales tax and the so-called "tampon tax" and discusses the menstrual equity movement in the United States and internationally. This Part also outlines the movement's common arguments and its successes in effecting reform. Part II explores why the tax on menstrual products still exists, evaluating theories of general tax policy, revenue building, and sex discrimination. Part III argues that the "tampon tax" continues to exist mainly due to a cloud of ignorance and stigma, not sound tax policy; policy changes around menstrual products in the wake of the COVID-19 pandemic prove how institutional ignorance has hindered reform. This Part suggests that coalition building and a youth-centered legal campaign are integral to menstrual product tax repeal. The recent groundswell towards repeal--legislatively, by ballot-initiative, and from within the Internal Revenue Service (IRS) itself--with support from an unlikely union of advocates, demonstrates that lawmakers are becoming cognizant of the gross inequity and are moving to correct it.

1. WHERE WE STAND IN THE FIGHT FOR MENSTRUAL EQUITY

   1. What We Tax Signals What We Value

      In the early twentieth century, jurisdictions worldwide began to impose taxes on retail purchases known as "consumption taxes." (10) Retail sales taxes in the United States emerged in the 1930s. (11) At the time, states needed a new income source to supplement property taxes, which no longer produced sufficient government revenue. (12) Retail sales taxes allowed states to cover their service obligations and assist local governments during the Great Depression's economic turmoil. (13) By 1969, 45 states and the District of Columbia adopted a state sales tax on products sold within their borders. (14) Today, only five states--Alaska, Delaware, Montana, New Hampshire, and Oregon--do not collect statewide retail sales taxes. (15) Since local governments can impose their own sales tax on top of the state sales tax, the combined aggregate state and local sales tax rates range from 4.35% (Hawaii) to 9.46% (Tennessee). (16) Nationwide, state sales tax generates more revenue than state income tax. (17) Many state budgets are funded in greatest part by their sales tax. (18)

      Retail sales taxes raise significant revenue for individual states, but they also introduce a problem for low-income consumers--taxing what a consumer uses rather than what they earn results in a regressive rather than progressive tax. (19) Progressive taxes require individuals with higher incomes to pay a higher percentage of their income. (20) Retail sales tax is regressive: individuals with lower incomes spend a higher percentage of their overall income on retail taxes, (21) compared to individuals with higher incomes. (22) To ease the burden on individuals with lower incomes, legislatures in every state with retail sales taxes have codified broad categories of exemptions in their state tax code. (23) In doing so, legislators typically identify two explanations for why certain products should be tax exempt. First, legislators often seek to exempt "necessary" products, (24) which often include food, clothing, and prescription drugs. (25) Exempting necessities primarily benefits low-income consumers who pay a higher overall percentage of their income to purchase these products, thereby combating the retail tax system's regressive nature. (26)

      In addition to exempting "necessary" products, legislators often enact exemptions to cater to important business interests within their states--states often exempt their large or influential industries' products. (27) States with large tourism sectors or states aiming to boost tourism revenues often exempt products sold at popular attractions. (28) Unlike exemptions for "necessary" products, this type of exemption primarily benefits producers or business owners with enough time and resources to lobby for them. (29) While "the typical statutory division between taxable and non-taxable [retail] items roughly tracks the distinction between 'necessities'" and non-necessities (sometimes termed "luxuries") (30) over time, states have created unique tax codes with a hybrid system of exemptions offering benefits to both low-income consumers and wealthy producers. (31) This dual exemption system benefits certain products and interests, but also creates financial problems. By excluding certain categories from the retail sales tax, exemptions necessarily narrow the available tax base for individual states and cause them to lose revenue. (32) Legislators and academics struggling to define the exact boundary between "necessities" and non-necessities often debate whether any products should be exempted as a necessity in the first place. (33)

   2. Introducing the Tampon Tax

      Blurring the line between necessities and non-necessities--by creating exemptions for special interests--draws attention to items that are not exempted but may be entirely necessary to the lay consumer. The "tampon tax" is a term commonly used to refer to the fact that tampons, pantiliners, menstrual cups, and other menstrual products are subject to a value-added tax or retail sales tax in many countries, states, and cities. (34) Unlike food, clothing, and prescription drugs, menstrual products are not considered necessities. (35) Proponents of a tax exemption argue that tampons, sanitary napkins, menstrual cups, and comparable products constitute basic, unavoidable necessities for women and thus should be made tax exempt. (36) Advocates for eliminating the tax on menstrual products also argue that the tax is "systematic discrimination" against women, girls, and all people who menstruate. (37) As succinctly as possible, the argument goes as follows: people who menstruate, on average, use approximately 12,000 tampons or pads in a lifetime. (38) The sales tax revenue made from menstrual products is a lifetime economic burden that overwhelmingly falls on women and disproportionately affects low-income women (39) who may be forced to choose between purchasing menstrual products and other necessities. (40) For people who menstruate, period products are essential to their ability to participate normally in society for approximately a quarter of each year. Without access to these products, women and girls often miss work or school, causing them to lose potential income or fall behind in class. (41) The inability to afford menstrual products also leads to unsanitary practices and health issues from reusing old products or creating makeshift ones. (42)

      Prior to 2015, roughly when menstrual equity came into the United States' spotlight as a popular reform effort, (43) only ten states did not have a sales tax on menstrual products. (44) These states either lacked a retail sales tax altogether or exempted menstrual products as "medical supplies." (45) Early legislative victories for repeal were won in Illinois, Connecticut, and the District of Columbia. (46) Beginning in 2016, litigators filed lawsuits in three additional states that taxed menstrual products--New York, Florida, and Ohio--arguing that the continued taxation of menstrual products violated the Equal Protection Clause of the Fourteenth Amendment. (47) Within three years, these lawsuits produced exemptions for menstrual products in all three states. (48) In 2018, Nevada voters approved a ballot initiative in favor of eliminating the sales tax on pads. (49) Since the launch of the Tax Free. Period, legal campaign by the non-profit Period Equity in June of 2019, Rhode Island, Ohio, and Utah have bowed to legislative advocacy efforts and eliminated the tax. (50) That same year, California, while not permanently exempting the products, extended its temporary state exemption already on the books for an additional two years, to July 2023. (51) Period Equity most recently sued the State of Michigan for unconstitutional taxation of menstrual products in a suit that is currently unfolding. (52) Presently, 30 states still tax menstrual products, compared to 40 just...