Last week, New York Governor David Paterson said to a local news affiliate “No new taxes this year. No new taxes next year.” This Tuesday, just a few days later, he’s saying he wants a soda tax. In discussing ways to address the state’s overspending problem, he stated “I promise I will put (the soda tax) back in my budget address and give the Legislature another chance to do it.” Then yesterday he tried to give the impression that tax hikes wouldn’t be coming. Speaking about the budget, he said “at this point…taxes and fees are unavailable to us.” At this point, it’s clear that the governor is considering a tax hike.
Put aside the fact that Gov. Paterson is going back on his word, and can’t seem to make up his mind. That is bad enough, but his reasons for advocating such a tax are dubious as well. It’s not the first time he’s mentioned such a plan. Back in February the Legislature rejected his proposal to put an 18 percent levy on sugary soft drinks– a tax he claimed would raise $500 million annually. He tried to sell the tax was a public health measure. Paterson claimed his point was to increase awareness for health information of foods consumed by children. It is nanny-state thinking at its worst.
Increasing so-called “sin taxes” or excise taxes for budget shortfalls is also something to be concerned about. New York’s budget currently has a projected three billion dollar overspending problem. Excise taxes do not generate significant revenue and will do nothing to solve this problem. Higher taxes on certain goods increases smuggling from states with lower taxes which results in declining consumption. Declining consumption makes this revenue source ever shrinking and volatile. In the end, these types of taxes lead to future tax hikes as lawmakers become reliant on budgeted revenue. Lawmakers then find themselves scrambling to raise taxes rather than tackle necessary reforms.