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Taxes

Government’s Unquenchable Appetite for Tax Dollars

posted on February 1, 2018

As Iowa’s tight budget situation lingers, the call for additional revenue sources continues to grow. The Des Moines Register recently published an editorial advocating a tax increase on beer to fund various programs and law enforcement efforts to deal with alcohol-related issues. The editorial board argued that a higher beer tax would discourage drinking and reduce the harmful effects of alcohol abuse. Iowa currently taxes beer at 19 cents per gallon.

Alcohol, tobacco, and soda, among other products, are often targeted for taxation because they are unhealthy. Excise taxes that are placed on these products are often referred to as sin taxes since they attempt to punish bad behavior and discourage use of the product. Revenue collected from sin taxes is often spent on prevention efforts and other government programs. Sin taxes, just as with all sales taxes, are regressive.  They have a larger impact on lower income people who cannot afford the additional burdens of the tax. An unintended consequence of sin taxes is that citizens begin to cross state lines to make their purchases in border states so the new revenues often are not as high as projected.

The Iowa legislature should oppose any effort to increase taxes on beer or create new taxes on products such as soda. In fact, the legislature should avoid raising any additional taxes. Policymakers need to remember that the purpose of taxation is to raise revenues to fund the priorities of government. Tax policy should not be a tool for social engineering, nor should it be viewed as the source for endless spending. When the government taxes something it is taking away income that is earned by an individual or business — in a sense that is taking away someone’s property and economic liberty.

The Founding Fathers “never intended government to be a nanny,” noted columnist Cal Thomas. Today government has encroached on almost all aspects of daily life. No one should take the serious problems of alcohol abuse lightly, but attempting to tax our way out of that behavior is not the answer.  Perhaps the best example of a failed government policy at social engineering was the outright prohibition of alcohol with the 18thAmendment to the Constitution. The “noble experiment,” as prohibition was referred to, was designed to cure society from the effects of alcohol abuse, but it ultimately caused more problems than it cured and the 18th Amendment was repealed.

In 1964 President Lyndon B. Johnson declared war on poverty. After 50 years and $19 trillion in spending by federal and state governments the war on poverty has failed. The lesson is that governments can tax and spend, but it does not mean that will solve a problem.

Should government really try to use tax policy to limit our freedom of choice as consumer? Should government declare war on behaviors and choices that they identify as harmful?  Should we increase the tax on soda, red meat, and potato chips, too?  Government should be focused on encouraging, protecting, and expanding freedom for citizens.

“No government ever voluntarily reduces itself in size,” stated Ronald Reagan. History demonstrates government will never have enough revenue. Advocates of big government constantly shout to “fully fund” all sorts of programs, but government will never say it has enough and will constantly demand more and more tax dollars.

Iowa has a tight budget, but the solution to seeking more revenues must not be found in increasing existing taxes or creating new taxes. Rather, the legislature should begin the process of reforming the state budget and working towards lowering tax rates to provide meaningful tax relief and opportunities for economic growth for all Iowans.