All sins are forgiven once you start making a lot of money. – RuPaul
Sin tax is “a tax on substances or activities considered sinful or harmful (as tobacco, alcohol, or gambling).” We in the United States pay higher tax rates on cartons of cigarettes, bottles of beer, and in Colorado and Washington, on marijuana. They seem like a throw back to our Puritanical origins, but the British Parliament first introduced special taxes on beer and meat in 1643 to “finance its fight against the crown.” The taxes persisted, being a healthy source of revenue, and in fiscal year 2010-11, “nearly 10% of all taxes collected
Certainly it seems that American politicians love themselves both “a good old-fashioned sin tax” and a business tax credit. At least they do in Michigan, where in 2014, cigarette and alcohol taxes reportedly generated more tax revenue than the state’s business income tax.
According to The Detroit News, Michigan sin taxes generated roughly $290.5 million in fiscal year 2014, compared to $137.6 million in net income taxes. In addition, Michigan businesses received about $768.8 million in tax credit refunds.
As you can imagine, the news is raising hackles on both sides of the aisle. “The fact that businesses are paying less than smokers and drinkers tells you something about our priorities” says Democratic Rep. Jim Townsend. Sen. Bert Johnson (D) took the tax credits to task: “We’re giving away money at an alarming rate in this state to people who are already rich, and we’re saying that’s good public policy.”
Yet the current business income tax rate is welcomed by Doug Rothwell of Business Leaders for Michigan, after decades of what he called “an extremely high business tax rate.” He thinks the 6% corporate tax rate is fair.
Michigan’s business taxes also get kudos from the non-partisan, conservative Tax Foundation, which ranked Michigan as follows in its 2015 State Business Tax Climate Index:
- 13th best tax climate in the U.S., overall
- 10th best corporate tax structure
- 14th best individual income tax structure
- 7th best sales tax structure
There’s always room for sin … taxes
Controversial as they are – and they are – sin taxes seem here to stay. Indeed, in some parts of the country, they are expanding. Many state lawmakers like them, in spite of the fact that critics call them regressive. They tend to reduce consumption, which can lower state health care costs. They also raise money; as anyone who has ever tried to quit the bottle or their smokes knows, it isn’t easy.
Taxes are “the single most expensive ingredient in beer,” according to the Beer Institute. In Arkansas, a state with many dry counties, a 2013 law was amended so that both local and out-of-state wineries would have to collect Arkansas state and local taxes (this put the state back into compliance with the Streamlined Sales Tax Agreement). And an increasing number of states are looking to impose or increase taxes on e-cigarettes.
Soda and similar sugary beverages are joining ranks with alcohol and tobacco, meriting higher tax rates in Berkeley, Chicago, and Mexico (although soda taxes have been proposed and rejected in many more locations). An extra tax on candy has been considered in the Navajo Nation, Vermont, and other states and localities. And imposing an extra tax on meat, arguably sinful in certain circles, has even been proposed by some scientists (not politicians, so your tax-free, home-grilled hamburger is safe… for now).
In Michigan, the Senate Fiscal Agency predicts that business and corporate income taxes will total $244 million in FY 2015, while taxes on beer, liquor, tobacco and wine will total approximately $280 million. In FY 2016, sin taxes could generate more than $278 and businesses could receive more than $800 million in tax credits, netting $159 million in tax revenue.
An opportunist would take this opportunity to go ahead and sin, guilt free. After all, it’s for the good of the state.
Share your wacky tax tales in the comments below.