TOPEKA — Facing tough economic times, lawmakers across the country are turning to so-called sin taxes.
Kansas lawmakers have pondered a package of tax increases on bad habits such as drinking alcohol, smoking and drinking sugary beverages to help fill part of a nearly $500 million budget gap.
"It is much more politically popular than raising the sales tax rate or the income tax rate," said Justin Higginbottom, analyst with the nonprofit Tax Foundation.
But that results in discriminatory taxes that place a greater burden on small segments of the population, he said.
"You don't have to pay it, but who is the government to say that just this product should increase in price?" Higginbottom said.
About 30 states are considering measures to raise taxes on tobacco products and cigarettes, according to a survey by the National Council of State Legislatures. The increases range from $1 per pack in New York state to a 50 cent increase in tobacco-producing South Carolina, which currently has a 7-cent per-pack tax.
Kansas taxes cigarettes at 79 cents a pack. Gov. Mark Parkinson has proposed a 55-cent increase, which would bring the state's tax to $1.34 a pack, the national average. A Senate committee talked about an increase of about half that, but the proposal didn't go anywhere.
Many states also are considering increases in alcohol taxes, and some are expanding the definition of sinful items to encompass junk food and sodas.
Effects of soda taxes
Ideas to increase sin taxes generally arise when governments need money, but the purpose is more to offset the cost of unhealthy behaviors, said John Wong, interim director of the Hugo Wall School of Urban and Public Affairs at Wichita State University. Higher costs might not stop everyone from smoking or drinking, but they do stop some people.
Earlier this month, the Rand Corp. published a study suggesting that how high taxes were and how they were imposed could affect their effectiveness in reducing soda consumption.
The study suggested that a proposed 18 percent soda tax in New York could have reduced childhood obesity. That proposal has not been adopted. Taxes on sodas currently top out at about 7 percent.
"Soda taxes do have the potential to help reduce children's consumption of empty calories and have an impact on obesity, but both their size and how they are structured are key to whether they create measurable impact," said Roland Sturm, the study's lead author.
A tax that increased the price of the drink on the shelf would be more effective than a tax applied at the cash register, the research suggested.
For convenience stores, which sell many products targeted by sin taxes, the ideas are likely to cut into profit margins.
"Every boutique advocacy group has pushed a tax on a product they don't want," said Jeff Lenard, spokesman for the National Association for Convenience & Petroleum Retailing.
Healthy eating isn't going to support convenience stores, he said. Consumers have proven that with their purchases, and rice cakes aren't beating out potato chips.
"You have to watch what goes into their mouths as opposed to what comes out of their mouths," Lenard said.
The taxes tend to encourage shoppers to look elsewhere — such as other states with lower taxes or the black market — for the goods instead of simply not buying them, he said.
Closing budget gap
New or increased taxes on tobacco, alcohol and sugary drinks have been mentioned in Topeka this year as possible ways to raise money.
No proposals have been approved, and it's too soon to tell what lawmakers will consider when they return to deal with the state's budget shortfall April 28.
The state will issue its latest revenue estimate today.
Early in the legislative session, political observers were saying lawmakers "want to get revenues in without giving the appearance of actually raising taxes," said WSU political science professor Ken Ciboski.
For most people, sin taxes do just that.
But sin taxes alone won't close a budget gap estimated to be nearly $500 million.
Alcohol and tobacco taxes were projected to make up 3.7 percent of the state's general fund revenue in this fiscal year, up from 3.2 percent in fiscal 2009. The governor has proposed boosting that to 4.7 percent for fiscal 2011.
"The downside for budget purpose is you are talking about a really narrow segment of a population," Wong said. "To address the problem you would have to have a huge increase in the tax rate."