November 6th, 2024

Sin taxes are suffering from a shortage of sinners

Wealthy nations face challenges with declining sin taxes on tobacco, alcohol, and fuel, impacting budgets. California's significant deficit highlights the need for new revenue sources amid changing consumer habits.

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Sin taxes are suffering from a shortage of sinners

Governments in wealthy nations are facing challenges with "sin taxes," which are levies on goods like tobacco, alcohol, and fuel. In California, for instance, a significant budget deficit is prompting officials to seek new revenue sources. However, traditional sin taxes are declining as consumer behaviors shift. Fuel tax revenues are expected to drop sharply due to the rise of electric vehicles, while cigarette tax revenues have decreased by $500 million, or 29%, since 2017. Alcohol tax revenues are also on the decline. These taxes currently contribute nearly half of California's spending on higher education, making the revenue shortfall a pressing concern for state finances. The situation reflects a broader trend where governments are struggling to adapt to changing consumption patterns and find alternative revenue streams.

- California is experiencing a significant budget deficit, complicating tax revenue generation.

- Traditional sin taxes on fuel, cigarettes, and alcohol are declining due to changing consumer habits.

- Revenues from cigarette taxes have fallen by 29% since 2017, and alcohol taxes are also decreasing.

- Sin taxes currently fund nearly half of California's higher education spending.

- Governments are seeking new revenue sources to address the shortfall from sin taxes.

Link Icon 15 comments
By @neonate - 5 months
By @alsetmusic - 5 months
I worked at a liquor store when I was 21 and lived in a midwestern bible-belt state. We had flyers at the counter educating customers to vote against a raise of sin-taxes (alcohol, tobacco, possibly adult material, I don't recall) to offset a budget deficit (specifically upkeep of roads and highways).

It's not right for my vices to pay for your infrastructure. Tax tobacco to fund cancer research. Tax alcohol to advance treatment of liver disease. Tax porn to fund, I dunno, therapy for people who can't view it in moderation.

On a similar note, I do NOT have a problem with paying for schools even though I don't have kids. It raises property values and that's a benefit to me and everyone in the district. Plus, educating young people benefits society as a whole. I'm not some "don't tax me" guy because taxes are good. They just should be limited and targeted and not levied unfairly against those with bad habits for the benefit / relief of all.

That said, I apologize for quitting drinking. Research into treating cirrhosis of the liver will have to take a moderate hit and that's my fault. /s but only sorta

By @bryan0 - 5 months
Isnt the point of "sin taxes" to offset externalities? If the externalities decrease then so should the tax. If governments are looking for a steady source of income then "sin taxing" seems like the wrong approach.
By @alphazard - 5 months
A lot of people are falling for the narrative that taxation has a coherent structure, and all taxes have good reasons, or go towards good causes. It doesn't work that way.

Taxes are just a wealth transfer item that can be used as bartering chip in the collective negotiations we call politics.

One group wants something (doesn't matter what it is) but let's say cannabis legalization. Another group might have no reason to care about that, but since the status quo is illegal, might as well extract some value from the first group. Never give up something for nothing. As such, cannabis taxes are included in all of the legalization bills.

This is the important part: the reasoning comes afterwards. Cannabis will make people unproductive, it will increase car accidents, the whole place will smell like pot, etc. Those are all reasons. There's data in some form to support all of them, but none of them are the real reason, which is that it's just good business to ask for something in return, and take as much as you can get away with.

By @dylan604 - 5 months
I'm always surprised at how "little" the use of the taxes for marijuana have made an impact. Either it's being grossly managed, or there's just not as much sales from mary jane as I would have expected.
By @AliAbdoli - 5 months
Tax social media platforms' advertising money. Their current incentives of maximizing engagement is fucking everyone especially the youth.
By @sien - 5 months
It's surprising that the article doesn't mention Australia.

In Australia a packet of cigarettes now costs $AUD 40.

The Australian government is also banning vapes with tobacco.

There is now a substantial industry of illegal tobacco that has recently appeared.

By @everdrive - 5 months
This is one of the main arguments I've heard against "sin taxes" -- in the ideal world, the tax revenue dries up because the behavior has been successfully disincentivized.
By @creer - 5 months
It's interesting in an ironic way that the article points out BOTH the effect of sin taxes in affecting behavior (as claimed) (and let's say alleged effect because I'm not going to take that claim at face value) AND the perenial use of sin taxes as general fund devices.

A solution would be fairly straightforward in acknowledging BOTH the desire to affect behavior AND the need to fund infrastructure (education, roads) BUT we all know that can't happen the way the sausage is made currently. For example because the general fund largely does NOT fund infrastructure (but funds bureaucrats, govt retirees, debt, etc) and because it's hard to BOTH, say, incentivize electric vehicles AND recognize that their usage must now be taxed also in order to fund ... wait no, not just fund road maintenance but fund everything in general, just like the tax on gas vehicles did.

Pickle, pickle but well deserved? The sausage recipe has become complicated enough that it's hard to make it palatable to anyone. And yet, as things stand, the whole pot largely does need to be funded. That is, the funding model deserves to be changed, but cannot be changed instantly.

By @techfeathers - 5 months
I'm curious if habits like smoking will ever make a resurgence. Seems like the rates keep going down. I can't imagine we'll ever go back to a time where smoking in restaurants or bars is normalized again.
By @henearkr - 5 months
Reminds me of "Japan urges its young people to drink more to boost economy" (two years ago):

https://www.bbc.com/news/world-asia-62585809

By @grimblee - 5 months
Hot take: stop requiring consumption to fill the state's coffers, just have people pay directly proportionally to their use and revenue. Example: you are a pedestrian anf have low income ? You pay 50€ a year in your taxes to participate to keeping the walk ways in a good state, maybe some calculation taking into public transport into account. You are a SUV owner with a nice salary ? You pay 500€ because your method of transportation damage the road a lot.

Two bird in one stone, state gets money, society is consume less and so pollute less

By @thrill - 5 months
We'll just broaden our definitions.
By @ysofunny - 5 months
pity them without undrestanding the two thousand year old idea of "forgiveness from sin"

pity even more them who really believe the government is funded through taxes, not through credit

By @Molitor5901 - 5 months
Sin? In this economy?! /S

I disagree with the conclusions, it's not the sin that goes away it's really the opportunities to sin.