Sin Taxes: When the State Becomes the Sinner

52 Pages Posted: 25 Jun 2009 Last revised: 16 Sep 2009

Andrew J. Haile

Elon University School of Law

Date Written: June 25, 2009

Abstract

To fill budget gaps, several state legislatures have proposed increasing existing taxes on tobacco and alcohol products. In addition, some states (as well as the federal government) are considering the enactment of new 'sin taxes,' for example on high sugar drinks and internet pornography. This working paper examines the arguments for and against imposing sin taxes. It argues that the use of sin tax revenues should be limited to ameliorating the problems caused by the 'sinful' product rather than for general governmental purposes. The paper uses the Master Settlement Agreement between the states and major tobacco companies to illustrate the moral hazard that is created when states become dependent on sin tax revenues. Finally, the paper draws out lessons from the states’ experience with taxing tobacco products to identify issues that should be considered as state legislatures weigh whether to enact new sin taxes.

Keywords: sin taxes, Master Settlement Agreement, tobacco, soda tax

Suggested Citation

Haile, Andrew J., Sin Taxes: When the State Becomes the Sinner (June 25, 2009). Temple Law Review, Forthcoming; Elon University Law Legal Studies Research Paper No. 2009-05. Available at SSRN: https://ssrn.com/abstract=1425621 or http://dx.doi.org/10.2139/ssrn.1425621

Andrew J. Haile (Contact Author)

Elon University School of Law ( email )

201 N. Greene Street
Greensboro, NC 27401
United States

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