When state revenues slide, lawmakers sometimes turn to sin.
And we’re talking about taxation, not confession. Last month, a coalition of groups, including the American Heart Association and American Cancer Society, pitched the idea of boosting Iowa’s current $1.36 cigarette tax by $1.50. Such an increase would generate more than $100 million in revenue for health care programs, they contend.
The recent federal tax cut package signed into law includes a healthy pour of tax relief for brewers. It’s a particularly sweet deal for craft brewers, who see their federal per-barrel excise tax of $7 sliced in half. That’s prompted talk of Iowa grabbing a pint of that federal tax windfall by raising the state’s own 19-cent-per-gallon tax on beer.
Republicans who run the Statehouse, including Gov. Kim Reynolds, haven’t welcomed or dismissed these proposals, although Iowa’s Republican U.S. Sen. Chuck Grassley did recently lament people wasting their money on “booze or women or movies.” Perhaps a tax increase would make folks think twice about at least one of those categories.
We’re initially skeptical of these plans. Behavioral modification through either tax increases or breaks strikes us generally as dubious fiscal policy. Sin taxes also tend to be regressive.
And we see the tax cut for craft brewers more as a welcome benefit to a growing manufacturing and entertainment industry in our state than as an invitation to raise taxes.
But we understand the state’s revenue situation, so we’re inclined to keep an open mind. And the best way to convince us higher sin taxes are needed is to provide us with a detailed plan on how exactly the money would be spent and how we might judge the value of that spending.
We’ve argued, repeatedly, that lawmakers too often hand tax breaks to interests without proving these gifts will result in public benefit. The same should go for tax increases of this nature. We may know what they’ll cost, but what do Iowans get?
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We’ve supported raising the state sales tax to fill the Natural Resources and Outdoor Recreation Trust Fund because we know what we’ll get — a constitutionally protected pool of dollars for water quality conservation and recreation purposes spelled out in a funding formula. We’ve concluded the benefits outweigh the regressive nature of sales taxes.
Perhaps we also could be convinced of the merits of boosting sin taxes. Perhaps a few cents on the barrel or more expensive tobacco could be put to good use. We’d love to see the plan.
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