CHEERS! Advocates for ending Prohibition talked about moral values. But filling state coffers was also on the agenda. Credit IMAGNO/Austrian Archives — Getty Images






In California, advocates of marijuana legalization are pointing to the tax revenue that will be generated.

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And 25 states have expanded or considered expanding their sanctioned gambling operations.

“The honest way to raise more revenue would be to raise income tax rates,” said Peter L. Faber, a tax lawyer and partner at McDermott Will & Emery in New York. “But it is more politically attractive to tax these kinds of things. No one can get mad at you for taxing people who drink too much,” meaning tipplers are fair game.

Cloaking taxes in moral terms is not new. Advocates for ending Prohibition during the depths of the Great Depression argued that the “noble experiment” hadn’t reduced drinking, while desperate social conditions had grown worse. Prohibition, they argued, encouraged cooperation with organized crime and contempt for the law.

But many historians have documented another reason for the end of Prohibition: the need to create new jobs and additional sales taxes.

Economists doubt that sin taxes greatly affect the behavior of most Americans, especially when the amounts tacked on are quite small (as they usually are). Demand for things like cigarettes and soda is relatively inelastic. That means modest increases in price don’t greatly influence most people’s behavior. In other words, a penny-per-ounce soda tax, which has been proposed in New York, is unlikely to deter people from supersizing their Sprites.

Old habits, especially bad ones, die hard.

This underscores why the real value of sin taxes is their ability to generate cash. After all, taxes that truly succeeded in changing behavior would be self-defeating. If a cigarette tax forced all puffers to quit, there would be severe withdrawal symptoms not only for smokers — but for states that relied on the tax for revenue.

“On some level, politicians want these taxes to affect behavior,” said Kim Rueben, a senior fellow at the Urban Institute who studies state and local taxes. “But they’re kind of in trouble if it works too well. If it’s actually effective in changing behavior, governments lose that revenue source and have to figure out what else they can start taxing.”

Clinging to this implausible pretense — that a few pennies can help someone kick, say, a porn habit — is understandable. Most Americans like to think that they are guided not so much by their wallets as by their ethics. And American jurisprudence is supposed to be guided by lofty ideals, not the bottom line; our laws should be moral, not mercenary.

But even if sin taxes exist primarily to balance the budget, they have social value. The debate over enacting a new tax, or hiking an old one, is a window into the country’s changing psyche.

A soda tax, after all, is more than a soda tax. If enacted, it’s something of a verdict on who is to blame for rising obesity rates. (The answer: Purveyors of sugary drinks, who will presumably lose a few customers, and those with unhealthy eating habits.) And it tells us something about how we try to ensure that the population is healthy.

“Public health used to be about going after the elimination of pathogens, cleaning the well that spread cholera,” said Katherine Pratt, a professor at Loyola Law School Los Angeles who is researching fat taxes. “Now we’re going beyond that and trying to address behavioral risk factors, which leads to charges of paternalism.”

The debate surrounding a ballot measure that would legalize, regulate and tax marijuana in California is similarly enlightening. Advocates are not dwelling much on marijuana’s harmlessness or acceptance, but rather on the amount of money it could generate. A voter may believe using marijuana is bad, but exactly how bad? Enough to give up its potential tax revenue?

The answer is not yet in. But California offers the latest example of how fiscal desperation has forced states to think more seriously about priorities. Social values do change over time; economic stress can force a necessary, if uncomfortable, review of whether current policies are still relevant.

In other words, sin taxes can spur us to rethink what behaviors are bad enough to be taxable — like drinking sugary sodas. Or in the case of marijuana legalization, what behavior is worth tolerating for the money.

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