Sin Taxes Fizzle in Congress

A few weeks back, I noted that states' attempts to pull more revenue from that traditional sin-tax target, the alcohol industry, were running into stiff opposition around the country. That didn't stop the U.S. Senate Finance Committee from proposing an increase in the federal excise tax on alcohol, along with a new tax on “sugar-sweetened beverages,” last month (as I reported here). But both of those proposals now seem headed for the ever-growing discard pile of ideas for funding the Obama administration's health-care reform program.

Lawmakers on both sides of the House are backing away from the sin taxes (or “nuisance taxes,” as Sen. Charles Grassley calls them), according to this article from tax and accounting solutions provider BNA Software. They're doing so for several good (and totally obvious) reasons.

First, they don't work: People buy less of the products, and revenue results are invariably disappointing.

Second, they result in job losses (but then, what tax doesn't?). Not surprisingly, this bothers lawmakers like Ways and Means Committee member Mike Thomson, who represents the Napa Valley.

Third — and, just possibly, by no means least — constituents don't like them. Rep. Stephen Lynch (D-Mass.) curiously associates persons of Irish heritage with a particularly strong opposition to an increase in the alcohol tax. “I have one of the most Irish districts in the United States of America, and there are folks in my district who would consider a massive increase on the beer tax as a hate crime,” the article quotes him as saying.

No reports yet on whether any of Mr. Lynch's constituents regard this statement itself as a hate crime. ###

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