In a rare win for liberty in California, lawmakers passed legislation that would ban local taxes on soda for the next 12 years. The bill will now be sent to the desk of Governor Jerry Brown (D-CA) – it’s unclear if he will sign it. Other states are considering similar statewide prohibitions on soda levies, including Oregon. But the Golden State, as well as the rest of the country, should take it one step further: remove all sin taxes.
An inherent characteristic of government is to tell you how to live – and to steal from you. Right now, the state doesn’t like the way you go about your day, from what you put in your mouth to how you spend your money. To the busybody nannies residing on Capitol Hill and in state legislatures across the country, you are sinning should you dare drink a two-liter bottle of soda or smoke a carton of cigarettes.
As a way of punishing you for this unacceptable behavior, bureaucrats and politicians will limit your freedom by adding a cost to your daily living. Only then can you learn that eating too much sugar and gambling on the Super Bowl is wrong and must be rectified.
Remember, they have your best interests at heart.
OK, well, they don’t. They’re indifferent if you drink a bottle of bleach or enjoy a lifetime of pipe-smoking in a single weekend. What they do care about is extracting more money from your wallet that is ostensibly meant to fund education, build affordable housing, or remedy some manufactured crisis. In other words, they want to squander new revenue, shut down small businesses, and hurt the poor.
What constitutes a sin is clearly subjective.
If an elected representative or lifelong paper pusher deems it wrong, then panels, studies, and debates to discuss possible taxation will commence. They typically have the conclusion in their mind already, but their demagoguery is what really matters.
It is reminiscent of Burt Lancaster in the classic 1960 film, Elmer Gantry, when he tells the crowd: “Sin, sin, sin! You’re all sinners! You’re all doomed to perdition!”
And this is what justifies their legalized larceny.
The History of Sin Taxes
It wasn’t until the 20th century that the government decided to tax nearly everything you buy. However, one of the first types of sin taxes came during the early years of America’s history.
In 1791, to help pay off the debts incurred during the Revolutionary War, the federal government approved a whiskey tax that started as low as six cents per gallon. But big government proponent, Alexander Hamilton, also believed that the sin tax would increase public awareness about the harmful effects of alcohol. Thankfully, there was a rebellion and it was abolished just three years later.
The sin tax eventually morphed into pecuniary penalties on a wide range of goods: tobacco, gambling, candies, drugs, gasoline, and so much more. We didn’t rebel, though. We just accepted it.
In modern times, sin taxes have evolved. Coffee, marijuana, plastic bags, fast-food, and meat are all just the newest forms of sin that the government and activists feel they must target. The way progressives are grieving every day, you can soon expect having a job to be a transgression.
No matter how odious and ridiculous these levies are, why would states ever want to eliminate them? As of the fiscal year 2014, states have collected about $33 billion in sin tax revenues. That’s a lot of change to blow.
Movements to Tax Your Treats
Jurisdictions worldwide have either instituted or have flirted with a sugar tax policy – or its various other incarnations, such as fat tax and soda tax. Like every other major political crusade, the government has declared war. The war on drugs, the war on poverty, and now the war on sugar.
Oakland maintains a one-cent-per-ounce soda tax. Seattle takes 1.75 cents for every ounce of Coca-Cola or Pepsi you purchase, and Boulder gets two cents for each ounce. Officials have celebrated, lauding the fact that there has been a decline in soda consumption. While this is true, there have been many unintended consequences as a result of these inane initiatives.
When Philadelphia became one of the first American municipalities to approve a citywide soda tax, progressives and statists cheered the city on. The funds were going to curb obesity, fund pre-kindergarten programs, and lead all this revenue to make everyone prosperous. This did not happen: just 49% of the collected revenues went to pre-K, consumers purchased more beer, hundreds of jobs were lost, and revenues were 15% less than originally estimated. Local lawmakers are now considering abandoning the progressive measure.
Still, City Councilman William Greenlee, who has dismissed the animadversions of his city’s failed push, told John Stossel that the tax is “for a good cause.” If that’s the case, then why not raise the tax to 100%, force everyone to eat more kale, and outlaw soda? But let’s not give the politicians any more ideas.
Unfortunately, it isn’t just the U.S. brand of politician who believes he knows what’s best for you. Mexico has imposed a tax on sugary drinks, Britain has recently implemented a sugar levy, and the soda industry thinks it is inevitable that Australia will hone in on beverages like a guided missile.
To quote the great Groucho Marx, this is the life of a politician: “Politics is the art of looking for trouble; finding it everywhere, diagnosing it wrongly, and applying unsuitable remedies.”
The Economics of Sin Taxes
Simply put: governments refuse to accept basic economics – behavioral and financial.
Because these taxes can significantly raise the price for a carton of cigarettes or a bottle of liquor, smuggling becomes the norm and black markets are formed. Just take a gander at the underground market in New York.
Since many of the impecunious partake in these bad habits, they are the ones who bear the brunt. That high-income, pro-tax hipster isn’t the one buying soda – he’s too obsessed with his grande, iced, sugar-free, vanilla latte with soy milk from Starbucks – it is those impoverished inner-city youth who acquire several bottles of Coca-Cola or Mountain Dew in an afternoon.
Over the years, governments have become so reliant on these revenues that they have encouraged so-called sinful behavior. Gambling is taxed, but states run weekly lotteries, telling everyone to buy a ticket.
When Denmark passed a fat tax a few years ago, politicians had brain aneurysms around the world. They paid close attention to what was going on in Copenhagen. They were disappointed to learn that the tax was repealed just a year later because shoppers simply hopped across the border, obesity rates did not decrease, and revenues were less than expected.
Whenever a politician hears or sees the three-letter word, their heart starts pumping, their excitement intensifies, and their mind becomes flooded with delusions of grandeur. We typically think of politicians as iniquitous, self-interested, and power-hungry individuals. But there is one breed of politician who is worse than the one you’d find in a Frank Capra movie: the politician who really wants to improve mankind and will do anything to achieve this lofty ambition.
A tax to a politician is what Lady Chatterley’s Lover is to a middle-aged old maid with a house full of cats.
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