Yet Another Sin Tax Proposal

When money gets tight, and people are balking at higher taxes, governments turn to sin taxes. Voters are always happier to approve taxes on things deemed bad, and alcohol is a very popular target. While per gallon taxes on beer, wine and spirits are almost universal throughout the US, more states are looking at adding per drink taxes as well.

Maryland Citizens' Health Initiative, an advocacy group dedicated to providing all Marylanders with access to quality, affordable healthcare, has proposed a 10 cents-per-drink tax. The proceeds from the proposed tax would fund programs to help alcohol and drug addicts as well as others dependent on state health.

While sin taxes sound like a great way to raise revenue and fund worthy causes, there are some problems with them. One big problem is that sin taxes often support large community support initiatives. At the same time, advocates of sin taxes boast that the increased tax will reduce the use of the product. Which sounds great, right? Here’s the issue: when sales of the product go down, the taxes collected are reduced, which creates a funding gap for the group or organization the taxes funded in the first place.

Like with all things tax-related, there are no easy answers.

(Hat Tip goes to WalletPop!)