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Report: Sin taxes on the rise

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Betsi Fores
The Daily Caller News Foundation

Sin taxes are on the upswing as states, desperate for new forms of income, look for ways to close their budget shortfalls.

A new study by the Mercatus Center illustrates the growth of  what they dub the “sindustry.”

“We’ve seen states and federal debt growing at almost unprecedented rates, so states are looking for new sources of revenue or just as much money as they can get,” report author Adam J. Hoffer, assistant professor of economics at the University of Wisconsin-La Crosse, told The Daily Caller News Foundation.

Hoffer explained there is also of an ideological, culture shift at play.

“[E]specially with the passing of the Affordable Care Act, we see almost a cultural shift of people taking the stance that of, ‘If i’m paying for your health care, that I don’t want you to consume things that are going to cost me money in the future’,” Hoffer said.

“It’s kind of an ideological shift of if we’re going to cover everyone’s health care expenses, then people think that what everyone puts in their body could and should be regulated.”

According to the study, 33 states have already implemented a tax on sodas.

“Because public health expenditures are correlated with the consumption of these goods, a case has been made for the selective taxation of all sugar sweetened beverages, junk food, and many items on the menus of fast food restaurants,” the report writes.

The study also questions the efficacy of these taxes.

“You can think of cigarettes that are addictive,” Hoffer shared. “Gasoline — people still need to drive to work, and so people don’t stop consuming these things that much even when the price goes up,” thereby getting punished merely for consuming certain goods.

Sin taxes also tend of fall disproportionately on low-income households.

By nature, sin taxes also incite special interest groups who lobby both for and against “the imposition of new sin taxes and to prevent existing tax rates from rising.”

Perhaps most troubling of all is the newly diluted use of the term “sin” tax. Formerly, sin taxes applied to cigarettes, alcohol, and gambling — things that are considered sin.

“Well now, we’re allowed to put a tax on any single good that we’d like. The biggest one that’s been growing is the sugary sweet beverage, basically just a soft drink tax,” Hoffer said.

“One of the things we ask, is what is sin? These things were chosen originally because they were sinful, and so now we’re applying these selective taxes on foods and things, so are we saying that they’re sinful as well?”

“It’s an ideological frame of mind of what is bad.”

Hoffer pointed out that while sugary drinks can contribute to the obesity pandemic, so can a lot of other things, including foods high in fat and sodium. He warned that the expanded use of the sin tax to soda could eventually be applied to foods high in fat and soda.

“Nowadays, the justification advanced 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,” the report says.

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