Libertarian troublemaker Nick Gillespie recently wrote for the Times that we should legalize not only marijuana (an issue which is now creeping toward majority), but also nationwide gambling and prostitution. His argument is basic Econ 101: ending the "deadweight losses" generated by black markets and taxing formerly illegal products redirects formerly illicit money to government coffers, not to mention slashing the law enforcement costs of monitoring those activities. He does the math and finds that legalizing marijuana alone could net the government about $13 billion.
But for whatever reason, I'm feeling even giddier about sin taxes. I think we could also raise taxes on legal "sinful" products (cigarettes, soda, beer, etc) to further prime government revenue. I see the government is already considering this, having estimating that a mere 3 cent tax per 12-ounce serving of soda could generate $24 billion in four years. That's not going to pay for health care, but it's a not-insignificant amount money that seems to have addition social benefits.
Rev. Robert Sirico, writing for The American, totally disagrees. In his world, sin taxes represent the idea that "the government knows better than you do how to feed and raise your children." This is echoed by Susan Neely, president of the American Beverage Association, who moans: "Taxes are not going to teach our children how to have a healthy lifestyle."
The idea that taxes have no right to reflect government values is crazy (why else would we give legal and financial bonuses to marriage?). Cigarettes already face steep state taxes precisely because those states value a smoke-free environment. Carbon taxes are advocated on the principle that companies aren't properly valuing the negative externality of pollution. At best, sin taxes take stock of the negative health externalities of obviously toxic products. If Virginia raises its (currently very low) tobacco tax and earmarks the funds for health care, it's either doing one of two things: Discouraging cigaratte use or raising money to cure future emphysema cases. Whether the tax forces VA consumers to question their smoking or pay for its effect, it's still preferable to having the rest of the state pay more taxes for their failing health. At the end of the day, we might as well tax the things we're only going to have to pay for later.
Let me just correct a few items for you:
Cigarettes already face steep state taxes precisely because those states value a smoke-free environment.
No, steep state taxes are the result of politicians who fill government coffers by exploiting the hate and prejudice generated by the anti-smoker industry propaganda machine. There is no better friend to any politician than a ready-made enemy or scapegoat.
Whether the tax forces VA consumers to question their smoking or pay for its effect, it's still preferable to having the rest of the state pay more taxes for their failing health.
This is a variant of the oft repeated lie that treating smokers costs more than treating non-smokers. The fact is that even a reasonable tobacco tax more than pays for perceived additional healthcare costs for smokers. Moreover, the non-partisan Congressional Research Service, as well as economists like Harvard's Kip Viscusi, has shown that smokers actually cost the system less due to an average slightly shorter lifespan. In other words, non-smokers who live longer cost more because they draw Social Security, Medicare and other benefits for a longer period of time.
These negative externalities you discuss in this column are otherwise known as part of the cost of liberty. After all, any action anyone takes can be construed as having some direct or indirect effect on someone else. How much does a health nut or weekend warrior who still thinks he's 18 cost a smoker in doctor visits and broken bones? Should we tax them, too?
Taken to its logical extreme, your very existence could be construed as a negative externality. For example, suppose you are genetically predisposed to cancer and I have a "clean" genetic profile by comparison. Why should I have to pay for your treatment? Granted, this is an absurd argument, but it is ultimately the one you are making.
The only reason you have the freedom to live as you choose is because I'm willing to tolerate your freedom in exchange for my own and vice versa. Liberty for libery's sake. This is the foundational idea of this country. The question is do you want to live in a free country, or do you want to nickel and dime each other's freedom into oblivion?
There is a difference between an ordinary tax which is levied on most products and a Sin tax designed to bully citizens into changing behaviors which are politically unpopular. Sin taxes are basically un-American, unless your copy of the Delcaration of Independence says that we are entitled to life, liberty and the pursuit of happiness only if our choices are determined by the government to be sufficiently cost-effective.
Co-sign.
Dear Editor,
Childhood obesity is a serious and complex problem that requires thoughtful and comprehensive solutions. The same is true for improving health care in America.
It’s why America’s beverage industry stepped up three years ago to develop the national School Beverage Guidelines that cap calories, reduce portion sizes and remove full-calorie soft drinks from schools. The guidelines help teach our children the skills to balance calories that will last a lifetime. A tax won’t teach them anything.
Furthermore, people view it as an over-reach when the government uses the tax code to tell people what to eat or drink. They view it as just a money grab.
We need government to focus on meaningful programs that make a difference for health care. A soda tax is just the wrong public policy for such a complex problem.
Thank you,
Jessica Badger
American Beverage Association
Jessica,
Soda and other overly sweetened beverages (and refined foods, for that matter) are poisonous drugs. They are unnecessary items which are scientifically designed by beverage companies to elicit addictive neurological responses in our brains. They have no nutritive value. They are linked in powerful ways to many adverse health effects and diseases including diabetes, high blood pressure, and corornary artery disease. The government, through medicaid and other programs pays for the diseases they cause. These products disproportionally affect the poor, who are less aware of the effects of overconsumption (say, more than once a week) of these products. The food and beverage industries spend ten billion dollars a year advertising largely unhealthy and unnecessary products. I never see a broccoli commercial, for example. Just soda, chips, beer, sweetened cereals, etc. etc. By contrast governments spend about $10 million in pro-healthy eating advertising. It's no contest.
If the government wishes to tax such unnecessary, disease-causing "foods" in order to run counter-claiming ad campaigns and pay for the billions in medical costs caused by these obesity-causing foods, then more power to them. It's about time.
What if our tax policy worked for us, not against us? Right now, polluters and marketers of unhealthy products are getting a free ride: their products have high “externalities,” i.e., the cost to society. GM makes a gas guzzler; the guzzler spews pollution into the air we breathe; a few more people get asthma; tax-payers and the rest of us pay to treat it. Shouldn’t GM be charged for those costs? Why not capture that cost in the form of a tax? If you’re gonna tax anything, why not make it fair? Instead of income taxes, regressive payroll taxes, and those infuriating taxes on cell phone bills, what if the government taxed pollution and anti-social behavior, i.e., stuff we want less of? Economics 101: when you tax something and the price goes up, consumption goes down. Couldn't we all use a little less congestion, pollution and disease in our lives?
The magic goes beyond economics, creating something called "the quantum effect." By shifting taxes away from good behavior (making money, calling your mother) and onto bad behavior (driving a Hummer, smoking), there is a “quantum effect” whereby not only does the government collect the tax money, but the cost of the government doing it’s business goes down. We get our cake and then we get another slice.
For example: if the government raises the cigarette tax by $1 a pack, consumption goes down 10% ( a good thing); and lung cancer, asthma, and emphysema fall as well, saving millions of dollars in Medicare costs. So the government gets the $1, plus it is spending, say, 10 cents less. The
quantum effect creates a net win of $1.10 – by only taking a dollar from the tax-payer. For every 1% the price of alcohol goes up, traffic fatalities drop .9%. A higher tax on alcohol can mean significant cost savings for EMTs, ERs, police, courts and prisons. And a tax on plastic bags, for instance, will raise revenue but also lower costs as use of bags plummets (California spends $27 million a year cleaning up plastic bags, and $300 million locally). Ireland saw a 90% decrease in plastic bags after a similar tax was enacted. Twenty-five cents times 19 billion bags a year is a huge amount of money ($4 billion dollar), but assume a drop of 90% in use. Either way, it’s a win. Especially for those cute sea animals photographed ingesting plastic bags – what would you pay to never have to look at that again?
Sugar and corn syrup consumption is directly correlated with diabetes rates and obesity. Americans pay for treating these diseases directly and indirectly (Medicare and higher insurance premiums). A tax on unhealthy, disease-causing food -- sugar, refined flour, trans-fats -- would save millions or billions of dollars currently spent on treating diabetes, obesity, heart disease and cancer.
One of the most floated arguments against these "sin taxes" is that they are regressive and unfairly effect the poor -- rich people will continue to drink soda and smoke. But in truth, price-sensitive consumers benefit disproportionately from these taxes – the rich will continue to drink soda and smoke -- suffer for that choice. It’s hard to argue that cheap soda and cigarettes help low-income people.
By shifting taxes away from the things we want (productivity, property ownership) and onto the things we don't want (pollution, congestion, disease-causing behavior), people will pay the same tax dollar for a healthier society. Tax receipts will go down as people shift away from soda and cigarettes, but so will destructive behavior. It’s a “high-class problem” if the government’s sin-tax receipts go down. Assuming the overall tax intake is maintained at the current level, the quantum effect will kick in – as the government treats fewer illnesses and stops paying for the “externalities” of unhealthy products, ultimately the government can cut taxes or expand services. There's something in it for the libertarian and the progressive.