Talk Story
Raising sin taxes
is an easy, but not
long-term solutionSIX OF US divided up the check after a pleasant dinner last Saturday at Buca di Beppo, a family-style Italian restaurant new to Honolulu. It came to about $20 per person. Half was for food, the rest for one bottle of Chianti, two glasses of house chardonnay and a Diet Coke.
W.C. Fields once observed: "Inflation has gone up over a dollar a quart." Under the budget now proposed by Gov. Ben Cayetano, it would go up even more. The Senate already has approved increasing the liquor tax by 50 percent -- Cayetano asked that it be doubled.
STAR-BULLETIN / 1998
Gov. Cayetano wants to double the tax on alcohol.
"Alcohol doesn't help anybody and if I could wipe out alcohol with a law, I'd do it. The same thing with tobacco," the governor said Tuesday.
On the other hand, as Johnny Carson said, "I know a man who gave up smoking, drinking, sex and rich food. He was healthy right up to the time he killed himself."
When it comes to boosting so-called "sin taxes" on cigarettes and liquor, most states tread lightly and keep them in line with their neighbors. It's usually too easy to cross the state line and bring back a carton of smokes or a case of beer.
According to Dowd Muska of the Nevada Journal, when Michigan raised its cigarette tax by 50 cents in 1994, "Soon after, taxable sales of cigarettes in the Wolverine State fell by 21 percent, while sales in neighboring states rose."
As my late neighbor, Fletcher Knebel, said: "Smoking is one of the leading causes of statistics."
Hawaii is not alone in balancing its state budget on the backs of sinners, but here they can't just pop across the border for a six-pack. Other states -- including Alaska, Kansas, Nebraska, New Mexico, Oregon, South Carolina and Tennessee -- also are looking to boost "sin taxes" this year.
In Connecticut, some bluestockings wouldn't stop at doubling the liquor tax and boosting cigarette levies by 61 cents a pack. They'd also tax sugary snacks, yarn and vegetable seeds, now exempt from sales tax.
Lawmakers defend the proposed "Twinkie Tax" by saying snacks and candies don't rate the state tax exemption on groceries because they are "optional products."
"It's also true that no one needs to buy beer, wine or liquor," says Dan Gerlach, director of North Carolina's Budget and Tax Center. "It's a vice, and vices should be taxed, some argue.
"Well, I'm still waiting for the tax on double-triple-grande mocha-lattes at upscale coffee shops, the tax on pseudo-manly-man sport utility vehicles clogging suburban roads, or the tax on headphones used by cell-phone operators in aforementioned SUVs. Aren't those vices?" Gerlach asks.
ECONOMISTS say sin taxes aren't long-term revenue solutions. By driving up the price of liquor and tobacco, taxes reduce the amount sold, which further drives up prices, which further reduces demand, etc.
"Sin taxes do not raise revenue unless people use the product and they do not save lives unless people avoid the product," writes Forham University philosopher, Father James Sadowsky. "Will not many of those who want to raise the revenue want people to commit the sin of using the product?"
That was one problem with the camera vans. They relied on enough drivers continuing to speed that their fines would pay for the system and contribute to the general fund as well.
According to Rep. Ed Case, Hawaii has three budget options: "The first is to control costs and adjust them to realistically projected revenues. The second is to raise taxes on a permanent basis. The third is ... one-time transfers of special funds.
"The best option is to control costs ... now and for the foreseeable future," Case argues.
In other words, cut spending. But how? Cayetano says state government is already "right sized."
"Go figgah!" says Lowell Kalapa, president of the Tax Foundation of Hawaii. "While all the rest of the economy is downsizing, reconfiguring how they do business so that they can stay in business, government is proclaiming that any downsizing in its operation is going to stall economic recovery."
Yet, "One doesn't have to look far to see how tax dollars are being wasted and how government regulation makes it all the more difficult to live and work in Hawaii," Kalapa says.
Meanwhile, I predict few will come forward to defend the interests of tobacco and alcohol users.
For that, we'll have to turn to the likes of "gonzo journalist" Hunter S. Thompson, who said, "I hate to advocate drugs, alcohol, violence or insanity to anyone, but they've always worked for me."
John Flanagan is the Star-Bulletin's contributing editor.
He can be reached at: jflanagan@starbulletin.com.
