Sin Taxes:
Maryland's proposed 10-cent per drink alcohol tax
13 Jan 2010 in Regulatory Economics
Sin taxes are always popular with legislators. People volunteer to pay them, and volunteers garner little public sympathy.
Maryland legislators are proposing to levy a new tax of ten cents per eight ounces of alcoholic beverage sold in the State. A news story today shows how proponents of sin taxes tend to also be in favor of sin.
Washington Examiner staff writer Hayley Peterson says Maryland Del. Bill Bronrott (D-Bethesda) and state Sens. Verna Jones (D-Baltimore City) and Richard Madaleno (D-Wheaton) believe that this new tax will raise $200 million per year. That's 2 billion eight-ounce drinks.
Peterson gives air time to a conventional opponent, a lobbyist for the Maryland State Licensed Beverage Association. Jack Milani worries that the tax will lead consumers to "just cross the border to get liquor," but the tax seems too small to motivate much interstate substitution. Milani correctly notes that the tax would be regressive, affecting the poor much more than the rich. Still, it's hard to feel sorry for Milani's chosen victim--"the guy who drinks a low-end case of beer every Friday night."
The most interesting peculiarity about the tax is that its stated purpose is to accomplish three mutually exclusive public policy objectives:
- Reduce Maryland's expected $2 billion budget deficit.
- Expand Medicaid to cover childless adults, provide more services for the mentally disabled, and fund more drug and alcohol abuse treatment.
- Curb alcohol consumption in Maryland.
It's infeasible for the tax to accomplish the first and second objectives simultaneously. It can reduce the budget deficit only if it does not fund new spending, and if it funds new spending it cannot reduce the budget deficit.
If the tax actually reduced alcohol consumption in Maryland, it would neither reduce the deficit nor fund these program expansions because the State would not collect $200 million in new revenue. For that reason, it is virtually certain that proponents of the tax have no interest in reducing Maryland alcohol consumption, and indeed, would prefer that alcohol consumption increased. Sin taxes are popular as long as they are too weak to motivate people to repent.
