Very spirited discussion on today's Where We Live on "sin taxes". For some further reading on this topic, be sure to check out guest Andy Haile's paper "Sin Taxes: When the State Becomes a Sinner". The paper lays out the pros and cons of sin taxes, as well as information on the "Master Settlement Agreement" between states and tobacco companies. And there are plenty of footnotes with links to further reading.
After the show, Andy said he wished he'd been able to cite something he read in "Taxing Choice: The Predatory Politics of Fiscal Discrimination". (A fascinating read, I would imagine.)
As in the earlier periods of healvy excise taxation, Roosevelt's primary justification for increasing taxes was to generate additional federal revenues. The Depression had devastated the economy, and tax receipts were consquently down. Just before the introduction of income taxes on the eve of the United States' entry into World War I, alcohol taxes had surpassed tarrifs as the primary source of federal revenues. While the excise tax on distilled spirits technically remained on the law books, the passage of the Eighteenth Ammendment, ratified on 29 January 1919, mandated Prohibition. Realizing the revenue generating power of liquor taxes, Roosevelt pledged to repeal Prohibition in order "to provide therefrom a proper and needed revenue". The Democratic party's platform had a very un-Keynesian theme: "If only given the chance, Americans might drink themselves into a balanced budget". (emphasis added)
So, will the people of Connecticut be drinking and smoking ourselves into a balanced budget? 8.5 Billion dollars of cigarettes and liquor. We'd better get started...