Sin Tax Schadenfreude

The Reason Foundation published an article back in February ’09 looking at the failed logic of State (and Federal) Government placing such a huge reliance on Tobacco taxes as the means by which they hope to offset some of their budgetary woes in the “lean times.” They likened this broken record of failed tax policy to that of an “old vaudeville troop that can’t let go of its old laugh lines.”


Like all the other so-called “sin taxes” out there, there is a fundamental problem with believing you can sustain and expand revenues by raising the cost of “sin” to the point that some of the “sinners” will no longer be able to afford them. Taxing behavior designed to stop said behavior is not a viable method for growing a revenue stream; not in the eyes of sane normal people, at least. Yet our Political Heroes keep trying this technique over and over and over again. As Reason points out at the bottom of the piece, New Jersey still hasn’t figured this out:

In 2006, New Jersey raised its already high cigarette tax, thinking it would bring in an extra $30 million a year. It didn’t. Worse, it caused their actual collections to drop by more than $20 million. The tax increase threw the state’s budget off by $50 million, money that had to be made up by other taxpayers.

It should come as no surprise, then, that Texas would find itself in the very same predicament as New Jersey did when they discovered their tax increase on smokeless tobacco products last year did not have the effect they had intended:

The state’s current small business tax break could shrink as Texas faces up to an $18 billion shortfall in the next two-year budget period, some legislators say.
The cost of the tax break initially was partly offset by an increase in the tax on smokeless tobacco.

So Texas hands out tax breaks it can’t afford, justifies it to the voting public by promising to pay for it with increased tax revenues from sinners that were never realized, and must now increase taxes elsewhere to make up the difference…on the backs of those “other taxpayers” who are just innocent bystanders, already overtaxed, and who must now pay for the failed fuzzy math of their elected officials.


It has been in vogue for years to vilify smokers thanks to the hip “in” crowd that has waged and won the war against them. Politicians know where their golden geese are, and they know tax increases on people that are hated, by and large, by the mainstream (read non-smoking) public will not be resisted. They are easy targets, smokers, and the misery that the sin tax policy inflicts on them is but fodder for the press, and entertainment for those not having to fork over more of their money to be spent everywhere but where THEY’D like to see it spent.

When will our Political Heroes stop marginalizing segments of their constituencies and give spending cuts a try? Probably never, but there’s always hope- it’s all we’ve got.


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