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Study: More ‘sinners’ paying more ‘sin’ taxes

By   /   February 5, 2013  /   4 Comments

I’M SUPPORTING THE ARTS! Sin taxes start out punishing unhealthy behavior, end up subsidizing unrelated activities, a new study shows.

By M.D. Kittle |Wisconsin Reporter

UPDATED VERSION:11:26 p.m. 2/6

MADISON – Sin is in, and fat is where it’s at — when it comes to taxes.

Aiming to make American consumers break bad habits, governments across the land of the free are levying a wider array of “sin taxes.”

From cigarettes to sex to soft drinks to bacon, specialty taxes are generating tens of billions of dollars, much of it used to plug budget holes and a host of general purpose items.

“It’s kind of the same story we’ve seen with other taxes over time: When they are implemented they can appear somewhat harmless,” said Adam Hoffer, assistant economics professor at the University of Wisconsin-La Crosse and co-author of Sin Taxes: Size, Growth, and Creation of the Sindustry,” a new study by the Mercatus Center, a free-market research organization at George Mason University.

Take, for instance, the soft drink tax binge. It’s bigger than New York City Mayor Michael Bloomberg’s war on big gulp sodas. Today, 33 states have a soft drink tax. Many began with nominal 1-cent to 5-cent taxes, Hoffer said. But sin taxes have a way of rising.

“It’s the same thing with income tax; it becomes a lot easier over time to hike them,” Hoffer said.

Wisconsin doesn’t levy a sugary drink tax – yet.  But the Badger State ranks low and high in the typical sin taxes.

A new study by the Mercatus Center notes “sin” taxes on smoking, drinking, soft drinks and more are rising to meet growing government budget needs.

Wisconsin, in a tie with Missouri, boasts the lowest tax nationally on beer, at 6 cents per gallon, and charges a tax of $2 per gallon on spirits, among the lowest liquor taxes in the country, according to 2011 data.

At $2.52 a pack, Wisconsin has the eighth-highest cigarette tax. Hoffer said the hike turns the World War II-era slogan, “Smoke ‘em if you got ‘em,” on its ear.

“Smoke ‘em if you can afford ‘em,” the economist quipped.

And in large part, that’s supposed to be the idea of such sin taxes, particularly taboo tobacco use: Pumping up prices so high that you drive away the buyer and cripple the market. The proceeds, too, are supposed to be marked to cover exorbitant health care costs related to tobacco, alcohol and other sinful products that are crippling the U.S. health care system.

The Mercatus report asserts sin taxes are, for the most part, accomplishing neither.

Sin taxes have become nearly as addictive for governments as the taxable products, the study suggests.

“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.

Case in point, Wisconsin’s use of a Big Tobacco lawsuit settlement and the cigarette tax money.

Wisconsin was one of 46 states that received a combined $206 billion in the late 1990s Master Settlement Agreement. The Badger State was awarded $5.2 billion over 25 years. But when budgets tightened early last decade, then Gov-Scott McCallum securitized the payout and the state received a lump sum payout of $1.6 billion. The money helped solve the state’s budget crisis — until the next budget crisis.

“That money is gone, and now the cigarette tax is the only source” for the existing Tobacco Control and Prevention Program, said Dona Wininsky, director of public policy and communication for the American Lung Association – Wisconsin.

The Control and Prevention Program, Wininsky said, is at its lowest funding level in the history of the program, at about $5.3 million per year. Meanwhile, the state takes in about $600 million in cigarette taxes annually, the brunt of that money going for a host of other, non-tobacco cessation and care-related programs.

“We are not a pro-tax organization, although we recognize high prices reduce smoking,” Wininsky said. “But if you’re going to tax smokers, you need to provide the services to help them quit.”

The American Lung Association isn’t calling on a cigarette tax increase in Wisconsin this session, but it does seek parity in tobacco taxes.

Wininsky said higher taxes drive down consumption, pointing to oft-referenced statistics that indicate for every 10 percent increase in the price of a pack of cigarettes there is a corresponding 4 percent reduction in adult smoking, and a 7 percent drop in youth smoking.

The Mercatus Center study, however, disputes the efficacy of higher taxes, charging that the vast majority of the poor, the ones hit hardest by the tax, don’t stop using the disfavored product.

“If the goal is to convince people consumption is not a good idea, taxation is not a good route,” Hoffer said. “Most of the people keep paying the higher taxes to buy the product.”

Ultimately, Hoffer said, those spending choices not only hurt the individual but hurt the economy at large. Arguably, the consumer, strapped for cash, puts more of the scant discretionary income he has into cigarette or alcohol consumption.

Wisconsin’s taxing structure, may, in part, argue against the study’s assertion. Wisconsin has long ranked among states with the lowest taxes on beer and spirits while it consistently posts the highest drunken driving rates in the nation.

But sin taxes attack so much more than booze and smokes these days.

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.

The bottom line: the taxing industry is good, Hoffer says. So don’t expect any relief, sinners.

The bigger problem, the study asserts, is that escalating taxes aren’t changing behaviors.

“We all want a healthier population, economic growth and prosperity, but the approach and what the data tell us, the methods we’ve been trying don’t work,” he said.

The ambiguity of sin taxes provides wide room for abuse by opportunistic special-interest groups, the study asserts, raising questions of fairness.

“If taxes on ‘sins’ are justified because they plausibly generate negative health outcomes, then a tax could — and therefore should — be levied on all goods and activities that negatively affect human well-being,” the study posits.

“Where does the ‘should’ end? Why not impose taxes on all goods containing the wrong kinds of fat or cholesterol? What about excessive consumption of sodium? What about watching television, playing video games, or even reading a book? Those activities primarily are conducted while sitting down, staying indoors, and, hence, may impair one’s health. What about hang gliding, mountain climbing, or riding a motorcycle or bicycle, especially while not wearing a helmet?”

Contact Kittle at mkittle@wisconsinreporter.com

*An earlier version of this story stated Wisconsin’s beer and liquor taxes were among the highest in the United States. Those taxes rank among the lowest.

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Kittle is a 25-year veteran of radio, newspaper and online journalism. In July 2011, Kittle joined Watchdog.org as bureau chief for Wisconsin Reporter. He has spent much of the past three years covering the seismic political changes taking place in the Badger State. Last year, Kittle joined Watchdog’s national reporting team, covering everything from energy policy to governmental assaults on civil rights. Beyond being published in Wisconsin’s daily newspapers and in multimedia news outlets, Kittle’s work has appeared on Fox News, and in Human Events, Reason Magazine, Newsmax and Town Hall. His special investigation into a politically charged John Doe probe, “Wisconsin’s Secret War,” was the basis of a 2014 documentary on Glenn Beck’s TheBlaze. Kittle has made several appearances on Fox News, including “On the Record with Greta Van Susteren. He serves as weekly politics commentator for Lake 96.1 FM in Lake Geneva, and WRJN-AM 1400 in Racine. His resume includes multiple awards for journalism excellence from The Associated Press, Inland Press, Wisconsin Broadcast Association and other journalism associations. Contact Kittle at mkittle@watchdog.org.

  • http://www.facebook.com/people/John-Davidson/100003717458506 John Davidson

    World Atlas: More People Smoking Cigarettes than Ever

    There are more people smoking now than ever before, despite health warnings and the rising price of cigarettes. In 1980, 4,453 billion cigarettes went up in smoke, which increased to 6,319 billion in 2010. By 2020, you can expect to find nearly seven billion cigarette ends littering the world.

    Top of the charts in terms of nicotine addiction are Asia and Australia, which is where 57 percent of cigarettes are smoked today.

    These alarming statistics are among many of the intriguing facts laid bare in the ninth edition of Dan Smith’s The State of the World Atlas.

    Elsewhere, the book reports that 19 percent of Americans say they could not feed their families in 2011, despite living in one of the world’s richest countries. Meanwhile, 20 percent of India’s population remains undernourished, despite its Gross National Income rising by 450 percent since 1990.

    An even more shocking revelation is that 2.5 billion people live on less than £1.25 a day, which represents one in three of the global population.

    http://www.ibtimes.co.uk/articles/421066/20130106/population-statistics-state-world-atlas-dan-smith.htm

  • http://www.facebook.com/people/John-Davidson/100003717458506 John Davidson

    http://vitals.nbcnews.com/_news/2013/01/28/16741714-lungs-from-pack-a-day-smokers-safe-for-transplant-study-finds?lite

    Lungs from pack-a-day smokers safe for transplant, study finds.

    By JoNel Aleccia, Staff Writer, NBC News.

    Using lung transplants from heavy smokers may sound like a cruel joke, but a new study finds that organs taken from people who puffed a pack a day for more than 20 years are likely safe.

    What’s more, the analysis of lung transplant data from the U.S. between 2005 and 2011 confirms what transplant experts say they already know: For some patients on a crowded organ waiting list, lungs from smokers are better than none.

    “I think people are grateful just to have a shot at getting lungs,” said Dr. Sharven Taghavi, a cardiovascular surgical resident at Temple University Hospital in Philadelphia, who led the new study………………………

    Ive done the math here and this is how it works out with second ahnd smoke and people inhaling it!

    The 16 cities study conducted by the U.S. DEPT OF ENERGY and later by Oakridge National laboratories discovered:

    Cigarette smoke, bartenders annual exposure to smoke rises, at most, to the equivalent of 6 cigarettes/year.

    146,000 CIGARETTES SMOKED IN 20 YEARS AT 1 PACK A DAY.

    A bartender would have to work in second hand smoke for 2433 years to get an equivalent dose.

    Then the average non-smoker in a ventilated restaurant for an hour would have to go back and forth each day for 119,000 years to get an equivalent 20 years of smoking a pack a day! Pretty well impossible ehh!

  • Dale

    Wisconsin’s beer and liquor taxes are not high compared to other states. Our beer tax (six cents) is tied with Missouri for the second lowest. And our liquor tax is 13th lowest of 32 states with a liquor tax (in many states, the government directly controls the sale of liquor, and thus there is no liquor tax, per se)

  • roy

    It sounds like in 2011 19% of American families lost one or more family members to starvation. That’s a lot of deaths from starvation. I don’t remember seeing that in the news. Hmm.

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