HomeBudget & Tax NewsChief Economist: 'Sin Taxes,' or Raising Taxes Generally, Won't Help Texas Economy

Chief Economist: ‘Sin Taxes,’ or Raising Taxes Generally, Won’t Help Texas Economy

By Kimberly James

The Texas Legislature is considering implementing “sin taxes” to help boost the state’s coffers as it recovers from the slowdown brought on by the COVID-19 pandemic.

Vance Ginn, chief economist at the Texas Public Policy Foundation, told The Center Square that a “sin tax” commonly refers to taxes on items considered to have negative consequences by consumption or partaking in. Examples of items in Texas that currently face this kind of tax include cigarettes and alcohol. Other items that could face a similar tax in the state include carbon dioxide emissions and marijuana, though the latter would need to be legalized in the state before it could be taxed.

Ginn said that new “sin taxes” would not be a boost for the state’s economy but instead increase the cost on consumers, providing less incentive for the items to continue to be produced.

“In fact, imposing this tax on something like carbon emissions would depress economic growth as it would raise the prices of electricity, transportation and other goods and services,” Ginn said. “These types of taxes are often a form of social engineering to obtain a certain behavioral response … instead of just funding government expenditures.”

Things that would generate more economic growth, according to Ginn, include reducing regulations that are barriers to entrepreneurship, such as occupational licensing, and getting businesses opening again. Ginn also restraining government spending and implementing cost reductions would help the economy.

“Raising taxes is not the path to providing a more prosperous economy, as the core function of taxation is to fund government programs that are hopefully effective and limited in nature to not excessively demand higher taxes and thus crowd out the productive private sector,” Ginn told The Center Square.

 

Originally published by The Center Square. Republished with permission.

Kimberly James
Kimberly James
The Center Square Contributor

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