Wednesday, March 25, 2009

Latest Sin Tax

Sin taxes are nothing new. There has been a tax on cigarettes for years, and is getting ready to go up again on April 1st (kind of an appropriate date.) Likewise there have been taxes on alcohol, which my state, Maryland, is considering increasing. My friend over at Intrepid Ideas posted about an attempt to put a sin tax on chocolate. Utah, home of the Mormon Church, is considering a sin tax on caffeinated beverages.

The latest proposal comes from the state of Nevada where Democrat Senator Bob Coffin has proposed a $5 tax on legal prostitution. Senator Coffin estimates that the tax would put $2 million into the state coffers. The measure also has the support of the legal prostitution industry.

Now normally, I am not a fan of increasing taxes on anybody (not even the evil rich) but this one got me thinking while I watch Barack Obama throwing us deeper in debt. As a Libertarian, as long as all parties are involved in the activity of their own will with no coercion, I tend to believe prostitution should be legal. At the very least, I believe there are more important things for the police to focus their resources on.

Anyway, back to prostitution and our ever increasing federal deficit. Nevada is the only state that has legalized prostitution in parts of the state. For the most part, in the rest of the country it is an underground operation. Being underground, there is a much higher element of risk for the entrepreneur and the consumer in these transactions. What does this have to do with the deficit? Well, the government could legalize the activity and regulate it. Require all providers to have a permit for a fee. Tax the activity as proposed in Nevada. Plus, previously unreported income from the underground economy will now be subject to income taxes. If such a tax could raise $2 million a year in Nevada, how much would it raise in places like New York or Los Angeles?

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