Sin Taxes and Alcohol / by kevin murray

I do support sin taxes for items such as alcohol, tobacco, gambling, legalized marijuana, and would like to see sin taxes added onto porn (including all adult media and strip clubs).  But first, what is a sin tax?  A sin tax is a form of excise tax which is placed on certain specific commodities, such as tobacco, and not placed on other commodities such as milk. That is to say, it's a special tax placed onto special items in which these items are not mandatory to procure in the normal course of everyday affairs, that they are in fact, discretionary expenditures by the consumer and additionally are perceived by the general public as being something less than wholesome.  Further, an excise tax when applied to a specific product often has more than one excise tax component, that is to say, there will be the federal excise tax, the state excise tax, and in some instances a municipal excise tax applied to the particular product; not to mention the usual local and sales taxes applied.  Some people criticize sin taxes as being a form of regressive taxation, because it impacts poor people at a higher percentage of their income as opposed to rich people, but that is true of all taxation which is not progressive in nature.


Sin taxes, however, are not equally applied in fixed percentages to products, the specific excise tax rate varies from product to product and how it is applied.  A case in point is comparing the excise tax rate for both federal and state levels for tobacco and alcohol.  For instance, in April 1, 2009, the federal excise tax rate for cigarettes increased from .39 per pack to $1.0066 per pack, an increase of 158%, whereas in the last 55 years the federal excise tax on beer has been raised just once, in 1991, and consequently from 2009 to the present there has not been an increase in the federal excise tax rate for wine, beer, or spirits.


State excise tax rates vary from state-to-state, but taking recent history and only concentrating on four northeastern states that already had very high excise tax rates we can do a comparison of tobacco v. alcohol over the years 2008 through 2013.  Each of the states of Connecticut, Maine, New Jersey, and New York increased their alcohol taxes during this period, but Maine which increased their wine and beer excise taxes by 116% got this tax increase reversed by referendum within the same year, so in actuality, their wine and beer excise taxes didn't increase.  The aggregate increase for these four states was 16.25% for the wine/beer/spirit categories.  Over the same period of time, their cigarette excise tax in aggregate increased 33.51% for these four states, but this increase is really even higher, if we were to include the NYC excise tax of $1.50/pack which I have left out of this calculation.


Looking at this somewhat small footprint of time and states, from a state excise tax level of tobacco v. alcohol, the tobacco increase over the years of 2008-2013 is more than 100% higher than the alcohol excise tax.  In regards to the federal excise tax of tobacco v. alcohol, the tobacco excise tax rate increased 158% while the alcohol excise tax rate increased 0% (it remained the same), and all forms of alcohol have remained the same since 1991.  While each state is entitled to raise or lower their excise tax rates per their discretion and/or voter and legislative approval, it is puzzling why tobacco has suffered such a huge increase in its federal excise tax rate in which in 1991 it was increased to .20/pack and now stands at $1.0066/pack or an increase of over 400%, whereas alcohol after seeing its federal excise tax increase in 1991, has not had it change since! 


One can only conclude that the lobbyists for alcohol must be amongst the most effective lobbyists in all of America, because alcohol is certainly not a product that is without its demons and abuses.  It is high time that the federal government increased substantially its taxes on alcohol in which at best they have fallen asleep at the wheel, and at worse, have been compromised.