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Pity theEU DCYour browser does not support the element. California taxman. The state has a yawning budget deficit, which politicians are attempting to narrow. Local laws make it difficult to raise taxes, requiring a two-thirds majority. Worse, once-reliable sources of funds are running dry. Fuel-tax revenues are forecast to fall sharply as drivers switch to electric vehicles. Revenues from cigarette taxes have fallen by $500m, or 29%, since 2017; now those from alcohol taxes are dropping, too. This is a concern: at present, revenues from the trio of taxes amount to nearly half of what the state spends on higher education.Others are in a similar situation. The plans to phase out fossil fuels even as its finance ministries continue to depend on fuel taxes. Britain’s budget watchdog forecasts that the disappearance of petrol and diesel cars will cut £13bn ($17bn) a year from tax revenues by 2030; on October 30th Rachel Reeves, the chancellor, declined to raise Britain’s fuel levy, fearful of a backlash. Receipts from other “questionable” products and activities—alcohol, gambling, tobacco and sugar—have fallen from 4.5% of Britain’s tax take to 3.2% over the past decade. Governments spent years fighting sin. Now they miss it.At the turn of the 20th century, some 90% of American federal revenue came from alcohol and tobacco taxes. As the state grew larger, general levies became more common, with sin taxes mostly used as a tool to change behaviour. Recently they have grown in popularity, as governments have become ever more concerned about the health of their populations. Taxes now account for well over half the cost of a packet of cigarettes in Britain, which has helped push up the cost of a pack by 220% over the past 30 years. Although taxes on fuel are not strictly sin taxes, as they are levied to pay for road maintenance, their decline is driven by the fight against a modern sin: carbon-dioxide emissions.Nearly all studies on the impact of sin taxes find an effect. For instance, a British government review, looking at the impact of a levy on soft drinks, found that it prompted manufacturers to reduce the sugar content of their products by 46%. Social change is also playing a part, with populations across the rich world growing increasingly abstemious. In 1980, 33% of Americans smoked. Now just 12% do.What to do about the growing budgetary hole? Ratcheting up taxes on existing sins is an obvious choice. The problem is that doing so changes behaviour, further reducing revenues. California, for example, has raised its fuel tax every year since 2019. Britain’s budget on October 30th announced even heavier levies on booze, smokes and soft drinks. In September Slovakia approved new laws to raise taxes on sugary drinks and tobacco products, one of a host of measures that Robert Fico, the country’s prime minister, says will help solve its budget problems.The search is also on for new sins to tax. In the budget Ms Reeves announced a new duty to be levied on e-cigarettes (set a little lower than the one on actual cigarettes). America’s current vices of choice are marijuana and sports gambling. Lots of states have legalised both over the past decade, lured in large part by the prospect of extra tax revenues. In 2022 California earned double the amount from taxes on marijuana as it did from those on alcohol. “Let’s just hope a lot of people gamble and we get a lot of money,” remarked Jack Evans, author of the bill that legalised sports betting in Washington, , in 2018.Replacing fuel taxes is a tougher challenge. Charging drivers as they fill up their tanks is straightforward and fair: someone who drives a lot, and thus wears out roads, will also pay a lot of tax. Flat taxes on vehicle registrations would burden those who do not drive much; an electric car can be charged anywhere, making it difficult to identify electricity used for the purpose. Another option would be to charge drivers for every mile they drive. Virginia is experimenting with such an approach, but its voluntary programme has only 30,000 participants out of 6m drivers, and the state makes a loss on the project.Gluttons, gamblers and gas-guzzlers may seem in a weak position to argue back. But even sinners have the vote, as Ms Reeves was acutely aware when she declined to raise fuel duty. And policymakers want to avoid a sin of their own: greed.
