Reasons for Sin Taxes
For various reasons, state governments--and sometimes the federal government--impose high excise taxes on certain goods and services generally deemed undesirable by society. Politicians typically target cigarettes and liquor for this type of taxation, which exceeds normal sales tax rates, though the type of product or service susceptible to sin taxes is subject to expand. In 2010, the federal government imposed a 10 percent tax on indoor tanning bed services to help pay for the Patient Protection and Affordable Care Act. In the same year, several states responded to studies about the negative health effects of soda by imposing or considering the imposition of sin taxes on soft drinks. Politicians justify these taxes by saying they address public health concerns, though tax lawyer Peter L. Faber is one of many critics who see them as politically expedient ways to raise money.
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Political Expedience
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If a tax hike or the imposition of a new tax affects all or most of the populace--such as a rise in income tax rates--the political consequences are greater than if the tax is just on cigarette smokers or gamblers. "No one can get mad at you for taxing people who drink too much," Faber told the "New York Times," referring to sin taxes on liquor.
Health Issues
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Some politicians claim the purpose of sin taxes is to discourage consumers from engaging in the "sin." They reason that if cigarettes, liquor, gambling and other sinful behaviors are more expensive, people will be less likely to engage in them. However, Urban Institute senior fellow Kim Reuben points out that the government has no financial interest in decreased consumption, telling the "New York Times," "If it's actually effective in changing behavior, governments lose that revenue source and have to figure out what else they can start taxing."
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Cover the Costs of Sin
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"Forbes" magazine says another justification for sin taxes involves the costs associated with the sin. Cigarette smokers, for example, pass the health care costs of their habit on to the rest of the society if they can't pay their medical bills. W. Kip Viscusi, a law professor at Vanderbilt University, questions this logic, pointing out that smokers who die young don't collect Social Security benefits, which could offset the costs of getting sick and dying.
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References
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