Tax Analysts Blog

The Arrogant and the Greedy Team Up to Take Your Money

Posted on Apr 15, 2015

There is a theory that says the tax laws should be used to do one thing -- raise revenue to pay for public services. Taxes should not be used to engineer society, promote social agendas, foster economic development, or help anyone in particular. This theory has merit. Adherence would lead to less cronyism, fewer economic distortions, and less regulation through the tax code. State governments, of course, violate these principles all the time.

Who are the perpetrators? Those striving for bad tax policy represent an odd coalition of people who want to run your life, and people who simply want your money.

The Georgia House of Representatives approved a constitutional amendment to make strip clubs pay for the state's fight against child sex trafficking. Under the proposed amendment, all adult entertainment businesses would have to pay $5,000 per year or 1 percent of their revenue, whichever is greater, into a state fund for child victims of human trafficking. Forget for a moment the First Amendment issues involved in deciding what is an adult entertainment business. This proposal illustrates all that is wrong with the way states use the tax laws.

There are people in Georgia who get all riled up (and not in the good way) over the thought of strip clubs. The thought of naked ladies dancing offends some to the core. They are happy to impose a tax on such venues simply because they find them offensive. There is another group of people who think child sex trafficking is horrible and that the government should do something about it. To police such horrible crimes, the government needs money. That is where those who want to abolish exotic dancing come in.

Place a tax on strip clubs to pay for the public effort to curb child sex trafficking. A more mind-numbingly dumb idea is hard to imagine. First, what is the connection between strip clubs and child sex trafficking? None. I am aware of no studies or evidence that suggest strip club patrons engage in child sex trafficking. Second, if combating child sex trafficking is a good thing, why not appropriate general funds and pay for it with broad-based taxes on income and sales?

A recent Washington Post Wonkblog article alleged that the relatively low taxes on alcohol are killing Americans. I have rarely read such an irresponsible piece. Its premise is that alcohol consumption is bad because it leads to drunk driving and the spread of sexually transmitted diseases. It is an unprincipled call for higher taxes. Politicians who live for the sake of telling others how to live are eyeing booze. They are running out of places to keep people from smoking. It is too early to place restrictions on pot. But there are a lot of folks who would like to tax alcohol more heavily to raise revenue for things like teacher pay and road construction. The abolitionists and those who live off government largesse have much in common.

Then, inexplicably, the Tax Policy Center (TPC) published a blog post that essentially calls for higher sugar taxes. The TPC is usually really good on the tax policy stuff, but calling for an excise tax on sugar reflects a political agenda more than it does sound tax policy. The call for taxes on sugar and fat and soda emanates from the belief of some people that they have an inherent right to tell you what to eat. Maybe it's because they hate fat people (most proponents are model thin). Maybe it's because they hate poor people (all the taxes they propose are regressive). I think it's just because they like telling people what to do. Says the TPC: "Maybe a sin tax is just the thing shoppers need to help them live a life on the light and healthful" side. I am glad the TPC knows what we "need." I guess us simple folks just ain't smart enough to figure it out.

Of course, politicians who are always on the hunt for more money often applaud attempts to tax narrow consumption. They can use the money to help friends, family, and campaign contributors. Here is the TPC again, on a soda tax proposal in Vermont:

Now consider this. Vermont's proposed soda tax is projected to raise $35 million. Did I mention that Vermont needs to close an expected budget shortfall? I'm sure Vermont lawmakers are concerned about the health of their constituents and their shopping choices, but they're concerned about Vermont's fiscal health, too.

Finally on this topic, District of Columbia Mayor Muriel Bowser (D) submitted her budget recently. Her goal is to combat homelessness in the nation's capital. Even a libertarian like me thinks that is a laudable goal. She wants to pay for it in part by taxing e-cigarettes like real cigarettes. She also wants to raise the sales tax. We can discuss the irony of using the most regressive taxes to help the poorest people at a later date.

E-cigarette taxation best illustrates the confluence of arrogance and avarice. Those who cannot keep themselves from playing nanny have already begun to bar e-cigarettes from public places (to prevent the dreaded secondhand water vapor). And of course we have the obligatory restrictions on their use by kids. But the tobacco abolitionists would like to tax e-cigarettes with the knowledge that if you tax something, you get less of it. Don't be fooled. These people do not care about your health. They care about lording over you.

But there are others (like Bowser) who cast a covetous eye on electronic smokes. Two factors drive that thinking. If people smoke real cigarettes less, the states will lose tens of millions of dollars. E-cigarettes need to be taxed to replace that revenue (because it really isn't about your health). Since a lot of tobacco tax revenue is earmarked for schools, taxing e-cigarettes is all about the kids. Raising real taxes to pay for public services is hard. Teaming up with the prohibitionists is much easier.

This post is part of a longer article that first appeared in State Tax Notes.

Read Comments (9)

emsig beobachterApr 15, 2015

David,you provide a valuable service by informing (amusing?) us of the fiscal
follies of our political leaders at the state and local level. I am an ardent
federalist because I believe our national political leaders are just as venal
and corrupt as our state/local leaders. The state governments are "laboratories
of democracy" as well as sinkholes of avarice, and ignorance -- what a great
combination.

First rule of survival for state politicians: DO NOT ANTAGONIZE BIG DONORS
Second rule: Vote for bills that benefit big donors and well organized
constituencies even if they are not big donors.
Third rule: Do not impose costs (taxes) on well organized constituencies
especially if they are big donors.

Where I disagree with you is the characterization of taxation of heavily
sugared soft drinks as arrogance of the elites telling simple folk (you?) how
to live. If the sugary soft drinks DO result in higher levels of obesity which
further results in higher incidences of diabetes and other health issues, then
our feckless political leaders, as well as the TPC, are correct in their call
to impose Pigovian corrective taxes on the consumption of these products. Since
the main consumers of these products, as you have pointed out, are often lower
income residents, and who probably are on some form of public assistance,
These taxes should be used to fund public health programs ans to subsidize
non-sugary drinks. This is not the nanny state. You are free to consume as you
please, just pay the full cost of your consumption.

Perhaps you should write a book about all the wonderful and imaginative things
our state/local leaders are capable of. Call it Profiles in Political
Cowardliness.

As always,

Your faithful admirer and frequent antagonist

Emsig

david brunoriApr 15, 2015

Emsig, Here is why I disagree about the sugary drink tax. First, there are a
lot of people who can drink Coca Cola every day and do not get fat or diabetes.
I worked with a 120 pound guy once who drank 15 Dr. Peppers a day. Certainly,
if I have a coke once in awhile the effect on the national health care system
is minimal.

But for argument's sake lets assume sugary drinks lead to obesity and diabetes.
Why are we singling out Coke and Pepsi? Why not Big Macs and Whoppers? or
cannoli's? or kids sitting in front of video games rather than running around
outside? Why not tax people who hold office jobs (they've got to be less healthy
than field hands or oil rig workers).

My point is that soda alone is not the cause of all that ails America. We
should save excise taxes for those few products (like cigarettes) whose
intended use creates societal costs not accounted for by the market. I am
unconvinced that a delicious sugary sweet soda pop does that.

Mr. Sal S.Apr 15, 2015

David, I agree with you most of the time. I believe you're spot on about the
realities of our tax system.

I'm in the school of thought that taxes should only be used for public
services. I get bent out of shape every time a Republican or conservative
argues that it's "our" money, but then hypocritically turns around and takes it
from us in various ways, as well as purposely sabotages those "public services"
as entitlements and as inefficient solely to prove their point. Democrats and
liberals fair no better. Anyone not in either of the two major political
parties has an up hill climb trying to change the system for the better because
of all the powerful special interests that run our governments.

I suppose our tax system will never change so long as we have those influencing
our government for their personal benefit while justifying it by demonizing the
rest of us or lying to us that their policies somehow benefit the rest of us.

emsig beobachterApr 15, 2015

All the other bad things -- absolutely tax them for negative externalities they
generate. Cannolis will be exempted from this tax, of course.

P.S. You did not read the part of my post that used the conditional word: if.
Bagels, cannoli, etc. are necessities and should be subsidized by the revenues
produced by the excise tax on sugary soft drinks. Where you stand on these
issues depends where, and with whom you sit.

I stand and sit by my first post of this line.

Matthew BryanApr 16, 2015

It was hard to listen to anything you said once you said there is no connection
between the sex industry and the sex industry. You realize that is what you
said, right?

After that part, it's difficult to expect reason to play a big part of your
viewpoint.

KApr 16, 2015

It's wrong to pick on Bowser without at least noting that DC's ability to
choose how to raise revenue is restrained by Congress. I'm sure if she could
she'd use a commuter tax to raise the funds.

jrApr 17, 2015

@Matthew

Do you actually believe what you wrote? Surely you can appreciate that
labeling the trades similarly ignores that they have different practitioners
and different patrons. Would you similarly group doctors/pharmacists with drug
dealers?

david brunoriApr 17, 2015

K, Yes, you are correct; Congress unfairly restricts DC ability to tax (and
thus govern). But using an excise tax on e-cigs to pay for the homeless makes
little sense. There is no relationship between e-cig users and the homeless. We
should use broad base taxes.

david brunoriApr 17, 2015

Matthew, What I said was there was no connection between strip clubs and child
sex trafficking. That is, people who go to strip clubs are not the same people
who engage in child sex trafficking. Making a tax connection between them
(indeed making them analogous at all) is inappropriate.

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