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Do 'Sin Taxes' Make us Better People?

It was in the farm fields of western Pennsylvania that the United States of America saw one of its first public uprisings - the Whiskey Rebellion of the 1790s, where citizens used violence and intimidation to protest federal taxation.

Since then, though, most citizens seem to have gotten used to the idea of taxes on alcohol, and a myriad of other excise taxes - even if they don't like them. Taxes on alcohol, cigarettes, and gambling are common "sin taxes" levied in Pennsylvania and elsewhere.

But a new study from the free-market research organization Mercatus Center at George Mason University makes the case that a growing number of goods and services are being singled out for excise taxes. Among the concerns is that "sin taxes" are being applied to a broader base of goods - like soda or sugary products - where the label doesn't necessarily apply.

Already 33 states apply some type of soft drink tax. Pennsylvania isn't one of those - though Philadelphia's Mayor Michael Nutter has championed the idea in the past.

Sugary drinks aren't the only nemesis, at least, not for lawmakers who may look to a "sin tax" as a way to force "good" behavior. The study says that the justification used for "taxing sin goods is often based on paternalistic, normative grounds-policy makers can make better consumption choices for individuals than individuals can make for themselves."

From Wisconsin Reporter's M.D. Kittle:

The Mercatus Center study found 21 states have taxes on vending machine items, such as gum, potato chips and milkshakes. Four states have levied a special tax on ice cream. Florida and Maryland have each imposed a 6 percent tax on Popsicles.

Utah, meanwhile, has a skin tax, accessing a 10 percent fee on establishments where "nude or partially nude individuals perform any service."

There's big money to be had from the Sindustry, the study reports - $5 billion in beer taxes alone, and another $15.5 billion in cigarette taxes, as of 2007, the latest data available.

One of the most obvious "sin taxes" in Pennsylvania is the cigarette tax is $1.60 per pack of 20 cigarettes, or about $0.08 per stick). Then the cost is subject to a 6 percent sales tax, with an additional 1 percent local sales tax in Allegheny County and 2 percent local sales tax in Philadelphia County.

As the Mercatus study points out, such "sin taxes" are an attractive revenue source.

"The temptation for states to use selective excise taxation is politically irresistible since the revenues generated in such ways can be reallocated to the public treasury, while some taxpayers, who are portrayed as imposing costs on society at large, are penalized," the study states.

Cigarette tax revenues in Pennsylvania go towards the Children's Health Insurance Program, a Department of Public Welfare program, and the Agricultural Conservation Easement Purchase Fund, which pays for farmland preservation.

Pennsylvania also levies malt beverage and liquor taxes. Gambling taxes, too, go far - the Keystone State collects the most tax revenue from gambling than any other state.

Back in 2010, the Pennsylvania Budget and Policy Center researched taxing cigar and smokeless tobacco as Gov. Ed Rendell and others introduced proposals to add an excise tax. PBPC said that failing to tax these goes was a "revenue-loser for a state that can ill afford it but is also in effect a subsidy for the tobacco industry."

It cited North Carolina, South Carolina, Kentucky and Tennessee - the major tobacco producing states - as states who apply taxes to cigars and smokeless tobacco in addition to cigarettes.

Published: Tuesday, February 12, 2013

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