Gluttony, Greed, Wrath and Other Taxable Sins
In New York, Gov. Paterson tries to tax some sins, deregulate others.
New York is out for blood, wine, and cola. This week, Gov. David Paterson released a budget proposal. His goal: To eliminate the state's $7.4 billion budget deficit. His budget includes $5.5 billion in cuts and $1 billion in tax increases. The coverage of his budget might make you think that Paterson decided to do what other governors (ahem, Arnold) have shied away from: get serious about fiscal responsibility. The $134 billion overall budget was described as a "slash and burn" budget, but actual state spending will still be $787 million more than last year. Meanwhile, massive amounts of stimulus money are keeping the state afloat in the short term, but deeper cuts will have to be made.
And because Gov. Paterson can't seem to do anything right (with the possible exception of nuzzling, at which he is reportedly quite skilled), his "tough" budget is already on the skids. On Tuesday, he announced his budget proposal, including cuts in health care, education, and prison spending. On Wednesday, lawmakers pronounced it "dead." And so, a budget larger than the previous year's budget is (a) considered super tough, and (b) DOA. But as a matter of academic interest, let's take a look at what the dead budget contains, since Paterson's desperation is shared by governors across the nation, many of whom have a less fraught relationship with their various legislatures.
Much of the projected $1 billion in increased tax revenue would come from the state's sinners. In some provisions, he taxes the kind of behavior your grandmother would frown upon. Mostly, Paterson's taxes focus on discouraging gluttony. He suggests tacking on an extra dollar to each pack of cigarettes (already clocking in at an astonishing $10 per pack). He revived the once-dead soda tax, proposing a penny-per-ounce surcharge on "sugared beverages." Those taxes will bring in $210 million and $400 million for the year, respectively. Movie tickets, taxi rides, cigars, and massages are all on the taxman's list. Planning to just stay home and watch TV or listen to music? Add an iPod tax and a tax on cable or satellite service into the mix, just for good measure.
New York isn't alone among the cash-strapped states (read: all of them) in looking to take a tax sip from the nation's "sugared beverages." Today in New Hampshire, hearings are being held on soft drink taxes, and a bill is already in the pipeline. In Mississippi, a bill to impose a 2 cent per ounce tax is under consideration by the legislature. New Mexico Gov. Bill Richardson says he is getting increasingly serious about soda taxes as well. And the California Senate must not have given way to total despair, since they are working up a plan for taxing sweetened drinks. Because legislators and governors tend not to be too hot on math, the pro-tax Center for Science in the Public Interest offers a handy little calculator that shows how much money could flow into state coffers from a soda tax. And once they see those numbers—$400 million in free money!—it's hard to forget them when it comes time to add up the columns on a budget spreadsheet.
The state is also fishing for federal money—sometimes using it as bait for taxpayer money. Backed by cash from the Department of Transportation, the state of New York launched an aggressive campaign to stop "distracted driving" this week. The plan: Ticket everyone caught holding a cell phone in a car. The ticket revenue will surely not go to waste.
But New York is having trouble seizing even relatively low hanging federal plums. Paterson's budget includes a $1.1 billion cut in school spending, but he offered state legislators an out. The state had $700 million coming to it in "Race to the Top" money from the Department of Education. The funds are designed to encourage experimentation and other non-traditional education methods. The money would have gone right into state coffers, if they just committed to expand the number of permitted charter schools within their borders. But the deadline blew by, unheeded by state legislators unwilling to loosen the grip of the teachers' unions on public schools, even in exchange for federal bribes.
But when it comes to the sins of wrath and greed, Paterson's budget encourages more spending on the kind of behavior your black sheep uncle smiles upon. Budget provisions include legalizing ultimate fighting, allowing a lottery game in bars, extending legally permitted hours of operation for slot machines and—this is a big one—allowing the sale of wine in grocery stores. All to the end of maximizing tax revenue on these pricey sins.
A wide and varied cast of characters are complaining about the proposed cuts: you don't often see prison guards, soda bottlers, and cigar smokers fighting for the same cause. Rarer still, that team could wind up pitted against the state's slots gamblers and ultimate fighters. Smart money would be on the gambler-ultimate fighter team, if only the hapless Gov. Paterson weren't on their side as well.
Katherine Mangu-Ward is a senior editor at Reason.
