A pair of bills being considered at the state capitol would increase Utah’s dependence on “sin taxes” for revenue.
House Bill 337, sponsored by Rep. Tyler Clancy, R-Provo, and Senate Bill 287, sponsored by Sen. Mike McKell, R-Spanish Fork, would increase taxes in the state by a combined total of $55 million.
HB 337 increases taxes on nicotine products, including cigarettes. SB 287 attempts to increase taxes on certain companies engaged in what is known as targeted advertising — which, upon closer review of the bill, largely refers to social media companies.
Clancy’s reasoning for increasing nicotine taxes is simple: he wants to move Utah higher in the state-by-state rankings for cigarette taxes. Currently, Utah ranks 27th in the nation. That is a poor reason to increase taxes.
Taxes are meant to raise revenue so government can provide services to its citizens. If a targeted tax is imposed on cigarettes, it should raise revenue to cover the specific costs that activity creates for government.
With SB 287, McKell argues that social media companies have caused harm to children in the state and should now pay for the damage they have caused.
However, the bill is structured in a way that would allow social media companies to pass the increased tax costs on to advertisers in state. That means higher costs for Utah small businesses that rely on targeted advertising through social media platforms.
The primary justification for both bills is the desire to tax behavior some elected officials consider detrimental to society. The problem is that sin taxes are plainly bad tax policy.
First, they violate the principle of tax neutrality. Sound policy aims to raise revenue from a broad base at a low rate. These proposals do the opposite.
Second, they are unreliable sources of revenue. Because they depend on human behavior — and behavior changes — the revenue cannot be counted on. If revenue declines, the programs funded by these taxes will demand money from other sources, increasing pressure to raise additional taxes to make up the difference.
Finally, they force elected officials into the role of morality police.
Under sin tax proposals, lawmakers must decide which activities remain tax-free and which should be taxed more heavily. This places government revenue at the mercy of shifting social attitudes and political agendas rather than stable, dependable sources.
The pressure is on lawmakers to pass these bills, especially in a year when the legislature has limited surplus dollars to fund new projects or expand programs. However, in the long run, lawmakers would be better served by following sound tax policy and cutting spending if expansion is necessary to address social concerns related to these issues.
We urge the legislature to vote no on these proposals.