Definition of 'Sin' Expanding for Tax Base

Put down your knitting needle, granny, because Connecticut lawmakers are considering taxing your sweet tooth.

It started with a 61-cent-per-pack tax increase on cigarettes to help plug the $650 million budget hole this year. But in the last month, lawmakers have called for raising the levies on alcohol, junk food, health club memberships, vegetable seeds, yarn, and even candy sold in nursing homes, hospitals, and schools.

Gov. John Rowland recently expressed concern over the number of tax proposals floating around the general assembly. He suggested lawmakers take a look at cutting some of the bloat in the state budget before taxing the cupcakes in school cafeterias.

"I hope this is just a preliminary, fun discussion that has no reality attached to it," Rowland said.

Not likely, say analysts. 

"When it comes to raising taxes or cutting spending, politicians are more inclined to raise taxes and less inclined to cut spending," said Ron Utt, senior fellow at the Heritage Foundation.

The problem, said Utt, is that "sin taxes" — sales taxes that only hit consumers who buy the "luxury" product — are regressive, meaning they are levied on low-income consumers first.

"The traditional 'sin taxes' are on tobacco or alcohol — punishing adults for lifestyle choices," Utt said. "Most of this money gets extracted from lower income people who can’t afford to pay it. For the rich, it’s not much of a burden at all."

Many states are in a budget crunch, facing smaller revenues after last year's economic downturn.  They are under pressure to find new sources of revenues rather than ax popular programs created during the economic boom of the late 1990's.

States like New Jersey, New York and Connecticut have slapped higher tobacco taxes on smokers. Other states are seeking to raise levies on Internet use, gasoline, corporations, personal incomes and more.

"From beer drinkers and home gardeners to grandmothers knitting baby clothes, no one is safe," complained Connecticut House Republican Leader Robert Ward, who blames the Democratic-led General Assembly for the move toward increased taxes.

Observers say the fate of the various tax proposals will depend on whether various special interest groups support or oppose them.  

"There was a bill introduced in Washington state pushed by dentist on a 'snack tax' to discourage people from eating candy," said Lee Dixon, a health policy analyst at the National Conference of State Legislatures. "Polls taken by anti-tobacco (groups) show people support taxes on cigarettes."

In the case of liquor, however, it might be more difficult to convince a large constituency of drinkers, beer and wine manufacturers and restaurant and bar owners that higher taxes will be good.

"That's a more difficult tax to enact," said Dixon.

The Associated Press contributed to this report