What do individual behaviors and state tax policy have in common? Plenty, as it turns out. People who smoke or chew pay excise taxes on tobacco.

The same is true for people who quaff a beer, drink a martini or sip a glass of wine instead of a Shirley Temple. Included in the price of their

Is this news? No. But alcohol and tobacco taxes are only part of the story of an emerging trend in states: the use of tax policy as a means to change personal behavior and choices.

Taxes on beer and cigarettes have existed through much of American history, either to curb what may be considered a vice or to finance outlays, such as war spending. These targeted taxes are usually imposed at higher rates than a general sales tax on other retail items. But recently the states are taking aim at other behaviors and trying to change them through the tax code. In their sights: Promoting healthy lifestyles and safer driving or discouraging adult entertainment.

XXX TAXES

The most novel idea passed in Utah this session. The Sexually Explicit Business and Escort Service Tax imposes a 10 percent excise tax on the escort and adult entertainment industry. The language was carefully designed to target the sexual nature of escort services and nude dance clubs, rather than other organizations that provide companionship or services that clearly are not of a sexual nature. The funds raised by the tax will be dedicated to a special fund for treatment programs for sex offenders.

NUTRITION AND EXERCISE

Obesity, particularly in children, is on everyone's radar screen. New federal research attributes $75 billion in annual medical costs to obesity, so there is significant activity this year to address its risks. Several initiatives seek to encourage better nutrition or more exercise through the tax code.

Legislation in New York would fund the state's childhood obesity prevention program by a quarter-cent sales tax increase on video game and movie rentals, sweets and snacks. They were targeted because they promote the couch potato syndrome among kids that can lead to childhood obesity and future health costs to the state.

Another proposal to boost healthier living would provide incentives to exercise. That bill gives a tax credit for certain purchases of exercise equipment, gym memberships or other sports or activities related to fitness and healthy living. The credit limit is $1,000. Neither proposal had been acted on as of this writing.

Representative Jerry Ellis introduced a bill in Oklahoma that would have imposed just under a 2-cent excise tax on a can of pop. He said the bill, which did not come out of committee, was designed to provide funding for important budget priorities such as bridge repair, Medicaid and education. It would have brought in some matching funds, as well.

"It was less than 2 cents per can," Ellis says. "That's not going to stop anyone from buying a soft drink. And it's a better avenue than going to a property tax or a higher fuel tax, which is a killer tax in my opinion."

The Maryland Senate unsuccessfully tried to reinstate a snack food tax in the budget reconciliation bill. It would have removed the sales tax exemption for potato chips, corn chips and pretzels, among other snacks. The proposal, which was a substitute for another health revenue raiser, passed the Senate, but was not included in the final budget bill approved by the General Assembly.

Meanwhile, some interesting policy questions remain about special food taxes. How should nutritional value be measured and then put into policy? Should targeted items include foods that are high in calories or sugar or "bad" carbohydrates? How about saturated fat? Or should a common sense test regarding "junk foods" be sufficient? Differentiating can be challenging from a policy standpoint, particularly for snack foods, which have undergone periods of on-again off-again state taxation and exemption.

TRADITIONAL VICES

On the traditional "sin tax" front, at least 11 states have proposed tobacco tax increases this session. Michigan is one of several states with a projected budget shortfall in FY 2005. A proposed 75-cent increase in the tobacco tax would be earmarked for health care pro grams. When polled, 75 percent of Michigan residents supported it. One legislator was quoted as saying that the higher tax would also discourage children from smoking, because the higher price would be a greater drain on the average kid's pocket change.

Legislators in Kansas, Missouri and South Dakota looked at increasing alcohol taxes this session, but none of the proposals passed. The bills would have earmarked funds for alcoholism treatment programs, at-risk youths and aid to local governments, in addition to money for the general fund.

"We're convinced that substantial tax increases on alcohol, particularly beer, will dramatically reduce heavy and frequent drinking by underage kids," says George Hacker, alcohol policies project director at the Center for Science in the Public Interest. "There is a lot of credible evidence to support this."

Hacker cites a new study from the National Research Council on underage drinking that says price does affect alcohol use, and that higher prices tend to reduce consumption. A higher alcohol tax at both the federal and state levels was one of the study's recommendations.

ROAD RESPONSIBILITY

Another idea in at least two states is penalizing irresponsible drivers. New Jersey is looking at increasing surcharges in its existing unsafe driver law. Florida is considering a $1,000 surcharge on licensed drivers who have DUI offenses. Anyone who accumulates seven or more violation points against their license within the preceding three years will face a $100 surcharge each year and $25 more for each additional point above seven. The Florida Driver Responsibility Law was approved by the House Transportation Committee. The funds would be earmarked for certified trauma centers, brain and spinal injury programs, highway patrol officer recruitment and transportation projects.

PALATABLE TAXES

It seems clear that legislators and the public like taxing unhealthy or controversial behavior to balance the budget or support specific programs. The duality of purpose is appealing. Because vices impose public costs across communities, citizens aren't concerned that excise taxes don't broadly distribute the tax burden for public services or raise substantial revenues.

Excise taxes are apparently evolving into a blended policy intent one based on revenue needs and social goals. In any case, a growing trend toward taxing behavior by increasing the consumer's cost of consumption or otherwise discouraging controversial activities continues in 2004.

7 TAXES FOR 7 SINS

Target               What's Taxed

Child obesity        Soft drinks, snack foods, video rentals
Smoking              Tobacco products
Excessive drinking   Alcoholic beverages
Gambling             Casinos and other gaming venues
Unsafe driving       Surcharges on licenses
Sex offenders        Sexually explicit entertainment venues
Animal neglect       Pet food

STATE TOBACCO TAX ACTIONS

Year   Number of States   Revenue Raised

2003          19           $891 million
2002          20              3 billion
2001           6          215.5 million
2000           2            335 million
1999           3            125 million

Bert Waisanen is NCSL's expert on state tax policy.