Sin tax theory

Taxing “sin,” or something the state disapproves of, gives the state a financial incentive to increase it. This article or opinion piece from Alabama lists tobacco, alcohol, gambling, marijuana — and expands the list to include abortion. It contains this quote from Dave Barry:

“The only danger I see looming ahead is that the tobacco industry will get tired of serving as the bag person for the anti-smoking effort and actually quit selling cigarettes. In that case, the only way to keep the anti-tobacco money flowing in would be for the various governments to join forces with the legal community and sell cigarettes directly to the public out of post offices.”

Thanks to Brett Stone for sending the article.

How about boxing?  Taxing things that people disapprove of has its problems – but so does not taxing them. Prohibition sometimes fails.

What options do we have? Some folks would like the government to treat whiskey like milk. Maybe call that the “blinders” approach – it doesn’t recognize or account for different characteristics of goods. Governments have made so many bad and even corrupt decisions that some folks don’t want governments deciding anything.

Anyway, the options for government action may consist only of prohibition, blinders, and tax-and-regulate.

Government without funding is no government – anarchy. (Or take the idea of an all-volunteer military to its logical conclusion, with personnel paying for the weapons systems.) In the meantime, we have to tax something, I guess.

But all these issues are not capable of proof.  They are value judgments.  Right and wrong can’t be demonstrated.

A final thought: Extend the line of argument that sin taxes create an incentive for government to promote sin.  Then an income tax creates an incentive for government to promote income. Lots of folks with high incomes don’t see the income tax as their ally — or as an income-incentivizing tool that will drive the overall economy forward.  In other words, if sin taxes make government want people to sin more, do income taxes make government want people to earn more?   My first reaction is that any government incentive is swamped by the disincentive that taxes create for the private sector.  So income taxes discourage income more than they encourage it, and “sin” taxes discourage “sin” more than they encourage it.

 

 

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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