Oakland, California Mayor Jerry Brown has recommended the state solve its budget woes by exploiting residents’ bad habits, by taxing behaviors such as drinking and eating junk food.
In an interview published on December 20, Brown told the San Mateo Daily Journal “there are a number of activities” that could be taxed and suggested a tax on people who eat salty and sugary foods as well as “a tippler tax on those who drink at the bar.” Brown’s spokeswoman, T.T. Nhu, said the mayor has been influenced by policies in Canada, which “taxes chocolate in addition to alcohol and cigarettes.”
Radley Balko, a tax policy analyst at the Washington, DC-based Cato Institute, expressed surprise at the honesty of Brown’s approach.
“Politicians usually say the reason they want to impose sin taxes is to stop unhealthy behavior. I’ve never before heard an elected official say that the real purpose is to raise money. That’s a novel approach,” Balko said.
“Sin taxes do generate revenue, and I question the sincerity of government officials who say their real priority is stopping the behavior they’re taxing,” noted Balko. “Sin taxes usually are proposed only when governments face large budget shortfalls.
“In the case of tobacco taxes,” Balko explained, “state and local governments have become addicted to the revenue they generate and would take a financial hit if fewer people smoked.”
Rev. Robert A. Sirico, president and co-founder of the Acton Institute for the Study of Religion and Liberty, agreed. “The search for government revenue in fiscally tight times tempts legislators to raise revenue by imposing unusually high excise taxes on cigarettes, liquor, gambling, and so on. This type of charge appeals to voters who view it as a way of discouraging consumption of certain objectionable products. Yet the temptation to impose sin taxes is one that should be resisted for economic and moral reasons.”
In an essay posted on the Action Institute’s Web site, Sirico added, “The consequences of the sin tax are often the very opposite of those intended by its designers. Rather than increasing revenue, the sin tax can reduce it. Rather than discouraging what are regarded as morally questionable behaviors, the sin tax can make them more appealing. Rather than reducing what are perceived to be internal costs of the sin, the sin tax can increase them and expand them to society as a whole.”
Steep tax hikes “spur people to buy products on the black market instead of in retail stores,” noted Balko. Because of high taxes, the bootleg cigarette market has thrived for decades in New York City, diverting millions of dollars from lawful businesspeople into the pockets of criminals and terrorist organizations, Balko said. “The same thing could happen in places where alcohol taxes are dramatically raised,” he pointed out.
In a recent paper, “Back Door to Prohibition: The New War on Social Drinking,” Balko said excise taxes unfairly force all drinkers to pay for the societal costs attributable to a small number of drinkers who abuse alcohol. Problem alcoholics are unlikely to stop drinking because of higher alcohol taxes, Balko noted, so low and middle-income social drinkers bear the brunt of the tax. Alcohol taxes are “incredibly regressive,” Balko said, “falling disproportionately on the poor, as they spend a greater percentage of their income on alcohol.”
Nhu said Brown’s sin tax musings are “just an idea” for now. But she said Brown thinks “higher taxes in some form are needed” to put the state’s financial house in order, even though Governor Arnold Schwarzenegger believes the state’s problems are caused by “overspending and not under-taxation.”
On January 6, the governor said in his first major address of 2004, “We have no choice but to cut spending, which is what caused the crisis in the first place. If we continue spending and don’t make cuts, California will be bankrupt.”
Sirico, also a full-time parish priest, warned the sin tax debate has implications that go well beyond California’s current budget situation. “Before we empower the government with what are, effectively, pastoral responsibilities,” Sirico recommend, “we ought to consider fundamental issues regarding the interplay between private morality and public policy.”
John Skorburg is managing editor of Budget & Tax News. His email address is [email protected].
For more information …
Radley Balko’s “Back Door to Prohibition: The New War on Social Drinking,” released on December 5 as Cato Policy Analysis No. 501, can be found on the Cato Institute Web site at http://www.cato.org/pubs/pas/pa-501es.html.
Additional information on the Acton Institute can be found at http://www.acton.org.