Sin Taxes

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POLS 5440 Principles and Processes of Government Budgeting| Sin Taxes, Good or Bad?
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An Examination of the Use of Sin Taxes in the United States|

By: Stacy Madden4/27/2012
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Executive Summary
Historically sin taxes have been an effective and efficient way for the government to raise revenue. The federal government used tariffs and consumption taxes to generate almost all of its revenue in the early years of our nation. The tax structure and philosophy has evolved and changed since the beginning of our nation, however the use of sin taxes has remained a good way for governments to raise revenues. Sin taxes no longer provide a significant portion of federal or state governments; however they do provide a consistent stream of revenue.

This paper examines the use of sin taxes in the United States. First, the paper provides a basic understanding of sin taxes, current definition, and history. Next, the paper outlines the goods and services most commonly targeted by sin taxes and provides information about the effectiveness of these taxes to raise revenue and accomplish policy outcomes. Common goods and services targeted by sin taxes include; tobacco, alcohol, fuel, hazardous chemicals, gambling, prostitution, pornography, and unhealthy foods. Lastly, the paper will examine the ethical and moral implications of sin taxes from the perspective of those who support and oppose the use of sin taxes in the United States.

Introduction
Ben Franklin adequately stated the importance of taxes with his famous quote, “but in the world nothing can be said to be certain except death and taxes.” Citizens have vested governments with the power to tax in order to provide services for the common good. There are many different ways for a government to tax its citizens in order to raise revenues, ranging from taxes on income, wealth, and property, to taxes on goods and services. The United States uses many of these taxes in varying levels to raise the needed funds to carry out government business. Some taxes are generally accepted and uncontested, while others are highly politicized and hard for Americans to accept. Presently, the federal government relies on income taxes for the bulk of its revenue whereas states and localities rely more heavily on other forms of taxes to raise money for their functions.

The primary function of taxes is to raise revenue for the government, however governments have used taxes to help spark social change, punish those who partake of certain goods and services, or regulate the consumption of specific goods and services. In these instances, taxes move from matters of revenue to issues of social policy, acting as mechanisms to force certain behaviors from citizens. More specifically, sin taxes have been used in the United States to help change behavior or regulate the consumption of goods and services deemed as sinful. In this paper, I will define sin taxes and outline the political meaning of “sin,” provide a brief history of sin taxes and their use, examine the most common forms of sin taxes in the United States, and lastly discuss the ethical and moral implication of utilizing sin taxes as a mechanism of social change.

Sin Tax, a Definition
Before considering the implications of sin taxes and their influence on the behavior of Americans, it is important to define the term. Taxes, most generally, are levied by governments to raise revenue in order to conduct business in the public interest. The United States, utilizing a progressive income tax to raise the bulk of its revenue, possess a culture where citizens pay most of their taxes on time. (Mikesell 493) This system is not one that commonly uses taxes as a punishment, instead encouraging its citizens to pay their taxes for the common good and success of the nation as a whole. Noncompliance is low, and the government has even employed strategies to enhance payment, such as instruction and assistance. (Mikesell...
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