The Wages of Sin Taxes

In a misguided attempt to save us from ourselves, Oregon legislators have become addicted to the so-called sin taxes they place on booze, drugs, and gambling. If we don’t break their addiction, it will expand into areas such as sugary soft drinks and fatty foods.

Now, a provocative new study challenges the whole concept of sin taxes, finding that they “not only do little to limit the use of ‘bad’ products, they do nothing to reduce societal costs.” Most remarkably, the study “demonstrates that those shockingly large estimates of the costs that the consumption of alcohol, tobacco, sugar, and fat supposedly impose on society have little basis in reality.”
Sin taxes also hit the poor harder than the rich. That’s because products like tobacco and state lotteries are disproportionately purchased by lower income people.

 

Sin taxes also give governments “a financial incentive to foster the very vices they profess to despise.” This may explain why, out of the more than one billion dollars Oregon has received to date from the Tobacco Master Settlement Agreement between 46 states and the tobacco companies, “not one penny has gone to tobacco prevention.” Prevention would cut into the state’s lucrative tobacco tax revenue, just as it would cut into state monopoly liquor revenue. The same goes for the state lottery that supposedly does good things at the expense of addicted gamblers.

It’s time that Oregon break its addiction to sin taxes.

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Oregon Legislature Should End Its General Fund Lottery Addiction

A state legislator from Milwaukie, Carolyn Tomei, has introduced a package of bills designed to address some of the problems associated with the Oregon Lottery.

Perhaps the most important of the three bills is HB 2167, which would cap the total amount of lottery revenue going to the state’s general fund. Under her proposal, all money above the cap would be diverted into a so-called “rainy day” fund, used only during times of fiscal crisis.

This would begin to address a central problem with the lottery, which is the mixed incentives it creates for legislators. On one hand, most of them pretend to be concerned about the growing problem of gambling addiction. Yet, when they use lottery money to pay for base funding of important state programs, they are incentivized to promote gambling.

When priorities collide, the lottery as cash cow always trumps concerns about gambling addiction.

The best solution would be to get state government out of the gambling business entirely; but since that’s not politically feasible, cutting off some of the revenue to the state’s general fund is a good first step. If the cap is set low enough, it potentially could force legislators to look elsewhere for base funding, or maybe even cut spending. Either option would be better than the status quo.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Take a Gamble on the Train

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by Steve Buckstein

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The Oregon state legislature has used the state lottery as an almost endless source of funds for various projects over the years. When gambling doesn’t generate enough revenue for current wish-lists, legislators can authorize the sale of bonds repayable from future lottery revenue. According to official state documents, principal and interest remaining to be paid on lottery bonds is $1.6 billion, and the bonding capacity is virtually stretched to its limit. If they borrow much more they may not be able to repay the bonds.

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