financial policy

Economic and Financial Effects of Specifi c Taxes at the State Level in the United States

Introduction. This study describes states’ government experiences implementing new tax laws on goods with harmful properties. It provides a comparative analysis of new tax revenues in Colorado, Washington, Oregon, and Alaska.

Theoretical analysis. This paper explores the unintended consequences of new tax laws on state level in the United States. This article analyzes potential economic, health and fiscal effects based on Pigovian taxes approach. Pigovian economics discourages negative social activity by increasing tax burden associated with consumption without eliminating it or forcing it underground. Accordingly, taxes imposed on harmful commodities are intended to encourage people and businesses to consider the extra social cost when they decide to undertake the taxed item.

Empirical analysis. This paper analyses the new tax laws in Colorado, Washington, Oregon, and Alaska and tax revenues on harmful commodities. It provides comparative analysis of different types of taxes and fees in 19 states.

Results. The research shows the negative outcomes of its new tax initiatives –increased addiction rates, a increase level of expenditures on public health, etc. – with potentially positive ones – reduced prison populations, increased tax base, etc. The new tax policy shift will potentially cause a shift in expenditures from law enforcement to public health needs. New taxes laws on will increase state revenues on harmful commodities but also increase expenditures on public health and addiction-related costs.