The Leaflet – Five States Most Dependent on “Sin Taxes”

Published August 28, 2015

Five States Most Dependent on “Sin Taxes”

Mike Maciag, data editor at Governingrecently published an article discussing the five states most reliant on sin taxes. “States collectively took in approximately $32 billion in taxes on tobacco, alcohol and gambling in fiscal year 2014,” wrote Maciag.

Facing budget shortfalls, many state legislatures have proposed increasing taxes on these products,  and some states and cities are considering new ‘sin taxes’ on popular goods, such as sugary beverages and candy.

The debate concerning sin taxes has existed since the country’s founding. For instance, Founding Father Alexander Hamilton cited fiscal and health benefits as a justification for imposing a tax on whiskey. “The consumption of ardent spirits particularly, no doubt very much on account of their cheapness, is carried on to an extreme, which is truly to be regretted, as well in regard to the health and the morals, as to the economy of the community,” Hamilton wrote.

Although sin taxes have been used by government to discourage what legislators believe to be bad or unhealthy behavior, studies have proven sin taxes do not make people healthier and fail and often result in financially irresponsible action by legislatures. When states become dependent on sin tax revenues to fund government services, they develop an interest in maintaining sales of a ‘sinful’ product. This often leads to the states’ financial interest conflicting with their own supposed interest in protecting citizens’ health.

According to Governing, the five states most reliant on sin taxes are Delaware, Nevada, New Hampshire, Rhode Island, and West Virginia. Sin taxes make up 9.4 percent of Delaware’s tax revenue, 14.8 percent of Nevada’s tax revenue, 9.9 percent of New Hampshire’s tax revenue, 15.9 percent of Rhode Island’s tax revenue, and 11.5 percent of West Virginia’s tax revenue.

Heartland Senior Policy Analyst Matthew Glans argues in a Research & Commentary sin taxes lead to budget shortfalls: “While sin taxes do sometimes result in increased revenue over the short term, they often lead to an even greater increase in expenditures that often cannot be supported by the tax over the long term, thereby creating budget shortfalls. High sin taxes by design aim to discourage certain product consumption or actions but they also encourage smuggling and other illegal actions.”

Glans continues, “Sin taxes should be avoided because they distort the market and encourage unsustainable increases in government spending while placing an unnecessary burden on lower-income taxpayers. Instead of creating and increasing discriminatory taxes, states should focus on tax reform that lowers rates, puts dollars back into the pockets of taxpayers, and tightens states’ budgets by creating new, reasonable limits on spending.”

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Explaining why a Center for Constitutional Reform is needed, Heartland Institute President Joseph Bast said, “America is facing a constitutional crisis. Limits on the size and power of the national government intended by the Founding Fathers and placed in the Constitution have been violated repeatedly and with devastating consequences. The national government has grown to the point that it is now a clear and present danger to American life, liberty, and happiness.” Read More

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The Center of the American Experiment’s 2015 Fall Briefing with Sen. Tom Coburn
Don’t miss this special opportunity to hear Sen. Tom Coburn (R-OK) speak about his book The Debt Bomb: A Bold Plan to Stop Washington from Bankrupting America at the Center of the American Experiment’s 2015 Fall Briefing. The event takes place on Tuesday, October 13th, 2015, at 6:00 p.m. at Orchestra Hall in in Minneapolis, MN. Register Here
 

 

 

The August issue of Environment & Climate News presents highlights of the Tenth International Conference on Climate Change, hosted by The Heartland Institute on June 11–12 in Washington, DC. The conference featured 51 speakers and attracted more than 400 attendees. To watch complete videos of the panels, speeches, and award presentations, visit climate conference.heartland.org.

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