A sin tax scorecard

posted at 9:31 am on August 4, 2013 by Jazz Shaw

Sin taxes are typically added to liquor, cigarettes and other non-luxury items. State governments favor sin taxes because they generate an enormous amount of revenue and are usually easily accepted by the general public because they are indirect taxes that only affect those who use the products. When individual states run deficits, the sin tax is typically one of the first taxes recommended by lawmakers to help fill the budget gap.

We’ve covered plenty of cases here over the past few years of various states looking to fatten their coffers by passing new or ever increasing tobacco taxes. They range from New York to Illinois and across the ocean to Ireland, but the goal is always the same. Find a way to soak more revenue out of the public by claiming to be fighting something awful, while being unwilling to actually outlaw the awful thing in question. In fact, if tobacco actually were outlawed, whole segments of the economy would collapse, massive job losses would follow and state revenues would decrease, so it’s something of a cynical viscous circle. But how has the revenue generating side of this scheme worked out for the states which choose to go that route?

A new study from the National Taxpayer’s Union shows that this particular shell game isn’t delivering anywhere near the promises which were made.

Cigarette tax hikes lead to different types of tax increases, fail to meet revenue projections. In nearly 70 percent of cases between 2001 and 2011, tobacco tax increases were followed by other tax hikes! Whether directly due to their failure to live up to revenue expectations, or simply because they signal a political apparatus desperate for more pet-program funding, there is no denying that every taxpayer has cause for concern when they hear a tobacco tax hike proposal.

The study looks at 101 cases where cigarette/tobacco taxes were increased between 2001 and 2011. Of those, a whopping 29 actually met the revenue projections promised when the tax increases were proposed. That’s a seventy percent failure rate, which would be impressive even by Washington standards. And what happened when they failed to deliver? In 66 of 96 cases studied, other, unrelated tax hikes where imposed in the following 24 months.

One of the other big promises of tobacco tax hike aficionados is the smug inference that if they can raise more money by taxing nasty old tobacco users, the tax burden for everyone else can go down. How often does that happen?

Between 2008 and 2013, only two out of 40 revenue actions that raised the tobacco tax were followed by cuts in other taxes. Furthermore, if the results presented in a 2008 National Taxpayers Union study are included, only four of 103 tobacco tax increases between 2001 and 2013 (less than 4 percent) were offset by other tax cuts.

Other factors pointing to the systemic failure of this taxpayer fleecing strategy are included, so read the rest of the report. This trick is being pulled all over the country, year after year, with nearly uniform results. And yet it continues.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Maybe the GOvt can create Cigarette Stamps for poor people who can’t afford cigarettes.

Wander on August 4, 2013 at 9:37 AM

Just wait until they apply this to the soon-to-be-legal marijuana sales.

$10 per gram for the over-under bets.

Wino on August 4, 2013 at 9:42 AM

…so it’s something of a cynical viscous circle.

So that’s a circle with a glutinous nature or consistency? I don’t get it.

Trafalgar on August 4, 2013 at 9:52 AM

$10 per gram for the over-under bets.

Wino on August 4, 2013 at 9:42 AM

I’d go under. $70 for a 1/4 oz. is a lot, that’s almost $4,500* per pound, enough people would still be growing their own to undercut that.

*according to my math while still on my 1st cup of coffee.

Flange on August 4, 2013 at 9:56 AM

Doesn’t matter where the money comes from, the government will just see it as “extra” money for them to spend on something or other.

Mimzey on August 4, 2013 at 9:59 AM

So that’s a circle with a glutinous nature or consistency? I don’t get it.

Trafalgar on August 4, 2013 at 9:52 AM

Either spell check gone bad or it’s a sticky situation like gumming up the works and it needs some Castrol oil maybe.

Flange on August 4, 2013 at 10:02 AM

And what happened when they failed to deliver? In 66 of 96 cases studied, other, unrelated tax hikes where imposed in the following 24 months.

IOW, the politicians are lying. New/increased sin taxes are used to justify passing new government spending programs that must be funded by other taxes once the sin tax revenue is no longer enough, which typically occurs within a year or two.

It is a stealthy way of “funding”, without actually funding, more big government spending that becomes almost impossible to get rid of once in place.

farsighted on August 4, 2013 at 10:06 AM

When individual states run deficits, the sin tax is typically one of the first taxes recommended by lawmakers to help fill the budget gap.

Yeah, but.. it’s not our money anyway. It all belongs to them and they have the right to take as much as they need in anyway they can. So whether it’s a sin tax or some other tax.. stop whining and just hand it over.
Dem Rep: We’re Not Broke; Gov’t Just Doesn’t Have Your Money…Yet
http://finance.townhall.com/columnists/michaelschaus/2013/08/04/governments-right-to-steal-n1655732

JellyToast on August 4, 2013 at 10:09 AM

….Yeah,….well…you’re not a “REAL” reporter anyways…

Offhanded on August 4, 2013 at 10:09 AM

Once again, I refer you to South Park, specifically starting at 2:10 or so.

http://www.southparkstudios.com/clips/104220/museum-of-tolerance#searchterm=museum%20of%20tolerance

Smoking is one of those filthy habits that it doesn’t matter if increased taxes hurts the poor more than anyone else, similar to gas taxes and anything else that liberals find unappealing in their little bubbles.

darury on August 4, 2013 at 10:18 AM

If we go with sin taxes, Dem politicians alone could fund the Federal government.

faraway on August 4, 2013 at 10:28 AM

This trick is being pulled all over the country, year after year, with nearly uniform results. And yet it continues.

The entire teaching profession picked up a bad rap and for many in it rightfully so. So I’d like to change that phrase somewhat: “Those that can’t, teach. Those that can’t teach join the government”

chemman on August 4, 2013 at 10:42 AM

Of all the concerns, there is one – taxation – that alarms us the most. While marketing restrictions and public and passive smoking [restrictions] do depress volume, in our experience taxation depresses it much more severely. Our concern for taxation is, therefore, central to our thinking . . .

When the tax goes up, industry loses volume and profits as many smokers cut back.

If prices were 10% higher, 12 – 17 incidence [youth smoking] would be 11.9% lower.

It is clear that price has a pronounced effect on the smoking prevalence of teenagers, and that the goals of reducing teenage smoking and balancing the budget would both be served by increasing the Federal excise tax on cigarettes.

Jeffrey Harris of MIT calculated that the 1982 – 83 round of price increases caused two million adults to quit smoking and prevented 600,000 teenagers from starting to smoke…We don’t need to have that happen again.

A high cigarette price, more than any other cigarette attribute, has the most dramatic impact on the share of the quitting population…price, not tar level, is the main driving force for quitting

http://www.tobaccofreekids.org/research/factsheets/pdf/0146.pdf

unclesmrgol on August 4, 2013 at 10:55 AM

If we go with sin taxes, Dem politicians alone could fund the Federal government.

faraway on August 4, 2013 at 10:28 AM

…only because…you are not including…what they call “Fee’s” into the equation?

KOOLAID2 on August 4, 2013 at 11:13 AM

There is a bill moving through the Ca.State Legislature that will raise the tax on a pack of cigarettes by $2.00/pack.The voters of the state have turned it down twice in the last several years now they are going to cram it down our throats by law.It has never been about ” smoking cessation programs” they are running out of funds to raid.

jeffinsjvca on August 4, 2013 at 11:21 AM

Smoking is one of those filthy habits that it doesn’t matter if increased taxes hurts the poor more than anyone else, similar to gas taxes and anything else that liberals find unappealing in their little bubbles.

darury on August 4, 2013 at 10:18 AM

I’m guessing you’re snarking on us. If not, GFY.

platypus on August 4, 2013 at 11:27 AM

I believe it is far too early to determine whether or not higher taxes lead to lower consumption because, at least vto some extent, high costs drive purchasers underground-to black market sources. Also, I believe, that people in their 30s on up were truly alarmed at the high death rates among smokers vis-a-vis non-smokers and stopped based on danger not taxation but, alas, among the young, perhaps the rate has not dropped that dramatically.

Also raising taxes on “sinful” things (alcohol, tobacco, candy?) in order to RAISE REVENUE seems DIAMETRICALLY OPPOSED to LOWERING CONSUMPTION which, one would presume, would LOWER REVENUE–lowered even further by the aforementioned BLACK MARKET EFFECT.

So on the one hand the government is RAISING revenue on addicts to tobacco and alcohol which the general public has little sympathy for and therefore is unlikely to protest the increase but then the government brags that they are decreasing consumption thus LOWERING revenues. They can’t have it both ways.Also addicts, hooked on their “joneses” will do anything to avoid paying the higher taxes so they seek sources by which THEY PAY NO TAXES AT ALL through the black market or maybe, Indian reservations. So a lying government which now actually gets LESS revenue winds up getting MORE big government by hiring new government employees–inspectors, policemen, etc. to search for and destroy the black market market sources. What starts off as a higher consumption tax ends up yielding less consumption revenue and leads to much higher income and property taxes to pay for additional government bums on the payroll. The government wins and the people lose.

MaiDee on August 4, 2013 at 11:33 AM

I propose a population density tax for you folks in the big cities.

RickB on August 4, 2013 at 11:37 AM

Sin tax? Isn’t the gov’t handing out free condoms, abortion pills and the like? Start there. Then why not do all those, here’s your tax free, check and marketable food-stamps from the hard working productive folks, but remember, they’re gonna take it away if you don’t vote for us.
Where exactly does sin as taxable begin and end?

Don L on August 4, 2013 at 12:31 PM

Oftentimes, one may attribute such stupidity to the lack of foresight re: the Law of Unintended Consequences, but NOT in the case of “sin taxes”.
It’s good old fashioned common sense – all too UNcommon these days.
~(Ä)~

Karl Magnus on August 4, 2013 at 12:34 PM

Not going to offer an opinion on this until Pauline Krugman groupie bayam checks in.

Good timing for this thread, though-just the other day Democrat Heaven Massachusetts raised the price on cigs by a buck a pack. That’s gotta hurt.

Del Dolemonte on August 4, 2013 at 12:37 PM

Another fallacy of the sin tax is when it is used to fund something that is affected by the sin, or something else noble.

Example cigarette tax to fund non smoking campaigns. This snake-eating-its-own-tail is doomed to fail because eventually, the process works, the tax goes down and those in charge suddenly are alarmed at the loss of revenue.

Even worse is when a sin tax is used to fund something unrelated, yet endearing to the weepy-eyed liberal. They find themselves actually in a position to ENCOURAGE the sin to continue funding the noble endeavor.

kurtzz3 on August 4, 2013 at 1:16 PM

Well Alcohol is a *SIN* tax too, right?

Let’s quadruple the price of that Malbec!

It’s a disgusting habit that leads to public ludeness, motor vehicle accidents, bottles and cans along the highways…..

The cost on society is staggering!

It costs so much to take care of pancreatic cancer patients and people with alcoholic cardiomyopathy. People who WOULD have gone on to live healthy lives into the 90s, never dying of cancer or heart disease!!!!!

WryTrvllr on August 4, 2013 at 2:21 PM

http://www.tobaccofreekids.org/research/factsheets/pdf/0146.pdf

unclesmrgol on August 4, 2013 at 10:55 AM

Which of course might do something like free up their money for heroine and meth.

WryTrvllr on August 4, 2013 at 2:25 PM

I propose a population density tax for you folks in the big cities.

RickB on August 4, 2013 at 11:37 AM

Absolutely. Most of them are pretty dense.

WryTrvllr on August 4, 2013 at 2:30 PM

Even worse is when a sin tax is used to fund something unrelated, yet endearing to the weepy-eyed liberal. They find themselves actually in a position to ENCOURAGE the sin to continue funding the noble endeavor.

kurtzz3 on August 4, 2013 at 1:16 PM

Such as Prop 10 in California in 1998, a childhood development program funded by a tobacco tax, pushed through by Rob Reiner.

We called it the “Meathead tax”.

merlich on August 4, 2013 at 2:32 PM

Just wait until they apply this to the soon-to-be-legal marijuana sales.

$10 per gram for the over-under bets.

Wino on August 4, 2013 at 9:42 AM

Why would the government want to legalize and tax the stuff? They’re making more money by having the stuff brought in illegally.

Back in the day a pigeon flying near a NORAD radar site would have instantly set SAC on full alert. But planes laden with hundreds of pounds of drugs can easily fly in to the U.S. without notice. Riiiight.

Consider some things:

1. When’s the last time we’ve seen a big story about a major drug bust with footage of DEA agents standing in front of piles of cash, seize guns and stacks of seized drugs? I can’t remember.

Being very cynical, I can only wonder if there ever were any drugs in those packages or if there were that they were ever actually destroyed.

2. How come those major drug busts don’t happen more frequently. We’re spending billions every year on the “war on drugs” and what do we have to show for it in the way of seized drugs?

3. We’ve been conditioned to believe that the drugs come into the country in dribs and drabs such as mules swallowing heroin in condoms and the like. Really? We’re talking tons of the stuff getting in.

4. One would think that the “war on drugs” would necessitate greater border security and tougher documentation of foreign visitors from Mexico where most of it’s coming from. But instead it’s just the opposite. The Feds want this stuff to keep pouring in so they can get their cut, and in Cloward-Piven fashion help to further degrade our society.

5. The “war on drugs” allows LE to confiscate cash, weapons and property from honest U.S. Citizens at will with no due process.

6. The “war on drugs” allows the State to incrementally increase the erosion of the Fourth Amendment so as to cow the Sheeple and get our minds right for if/when they need to come out in full force.

7. I’m not saying that drug possessors and mules are never arrested and jailed. Oh, they are. But look at the relative amounts and do the math. The prisons and courts are clogged (unnecessarily) with users and small time transporters. The illusion of high risk keeps the prices artificially inflated. As to the courts and prisons, could partially be due Cloward-Piven at work. Think how many real criminals are released or get little to no time because of the swamping of the “justice” system. Then there’s all the bureaucracy of more prisons (more taxes, more jobs for cronies), and the money made off of building them and maintaining them. Then there’s the money to be made off of privately run prisons.

Don’t underestimate the power and wealth accumulated by the drug trade. It’s been around for hundreds of years. The opium trade from China and the Opium War wasn’t all that long ago, either. How do you think the Roosevelt family accumulated its fortune?

Dr. ZhivBlago on August 4, 2013 at 3:08 PM

1. When’s the last time we’ve seen a big story about a major drug bust with footage of DEA agents standing in front of piles of cash, seize guns and stacks of seized drugs? I can’t remember.

Dr. ZhivBlago on August 4, 2013 at 3:08 PM

Just did a Google news search and found at least 4 DEA busts across the US in the past 30 days alone. And remember that it’s not just DEA making drug busts-the US Coast Guard in late July made a huge ($35 million worth) cocaine bust off the coast of Florida. For the first time they used one of their new drones. But sad to say, those DEA and CG busts got almost no national press attention.

The busts are still happening, it’s just that the Democrat Media’s not reporting them.

Del Dolemonte on August 4, 2013 at 5:19 PM

Del Dolemonte on August 4, 2013 at 5:19 PM

Interesting. Like I said, they simply don’t seem to be making a big deal about these “busts” like they did in the past.

As for the Coast Guard cocaine bust of $35 million…that only leaves around $69,965,000,000 of cocaine not accounted for this year alone.

Dr. ZhivBlago on August 4, 2013 at 5:31 PM

I’m sure that our ruling elite have some store or PX that they can buy their cigs, alchohol, fatty foods and soda tax free. Just like the communists had the GUM store in moscow.

Kind of like exempting themselves from obamacare. We don’t want any “brain drain” or them to suffer too badly. After all ruling is hard work.

acyl72 on August 5, 2013 at 7:41 AM

Put a $100.00 tax per cigarette!
Lives hang in the balance!

Ban’em or shut up about them!

Bubba Redneck on August 5, 2013 at 11:07 AM