Thursday, October 27, 2005
Sin Tax -- Why Nevada Likes Gaming And Prostitution
OK, This post is about sin taxes, but not about Nevada -- sorry.
Evangelical Outpost had a really interesting post in sin taxes the other day. Joe makes two basic points
Joe's solution concerning the inequitability of sin taxes is a little tough though.
Then there is the issue of what really is a smoking related health issue, and the costs thereof. Smoking can end life earlier, but does it really end life more expensively? In some cases yes, but a whole lot of non-smokers die pretty expensively too. How do you really tell the difference? "Smoking related illness" is little more than a box that doctors check on a form used to accumulate actuarial tables -- it's often as much a best guess as a medical diagnosis. Given the aforementioned moral status of smoking it's likely to be where the doctor runs whenever the patient smokes.
Frankly, as with all taxes, sin taxes have problems associated with them. Besides, in my opinion its not really a sin tax -- it's an inelastic demand tax. Most of the things taxed in this fashion have a very high price tolerance point. Which means if the government really wants to strike gold they should abolish all of these taxes and tax health care.
Evangelical Outpost had a really interesting post in sin taxes the other day. Joe makes two basic points
- Tax policy is no way to moderate behavior
- Sin tax as currently practiced is in some sense inequitable
On his first point, I could not agree more. Joe quotes Fr. Robert Sirico on sin tax
It is a mistake to entrust the modern state with the enforcement of certain moral codes of behavior that extend beyond obvious crimes against person and property. When government is allowed to go beyond these limits and enforce a wider array of moral issues, it will substitute its own form of morality for traditional morality. A government program like recycling, for example, could be deemed more morally worthy than traditional virtues like fidelity in marriage. Obeying securities regulations could be seen as the very heart of virtue, whereas teaching children at home seen as a vice. The government's sense of morality, especially when it is influenced by excessive power, is often at war with traditional standards and common sense.I couldn't agree more -- the proof is in strong evidence in our society these days. Both recycling and smoking have taken on heavily moral tones in discussion. Neither is essentially a moral issue, they are health and science/engineering issues, but not moral ones.
Joe's solution concerning the inequitability of sin taxes is a little tough though.
Insurance companies already use actuarial statistics to determine the premiums paid by smokers, so there should be no reason why a similar method could not be used to determine the taxes. The state could calculate the total cost of the activity (i.e., Medicare payments, loss of income tax from early death, etc.) divide it by the quantity of the product consumed (i.e., packs per day smoked) and amortize it over the life expectancy of the average smoker. The resulting amount would be added to the price of each pack as the equitable tax on the product. The money could then be set aside in a special fund which would be used to reimburse the state for incurring these expenses.Such a solution would remain fairly inequitable. A responsible smoker -- someone that smoked only a couple of cigarettes a day and therefore had virtually nil in the way of health affects would be inequitably taxed.
Then there is the issue of what really is a smoking related health issue, and the costs thereof. Smoking can end life earlier, but does it really end life more expensively? In some cases yes, but a whole lot of non-smokers die pretty expensively too. How do you really tell the difference? "Smoking related illness" is little more than a box that doctors check on a form used to accumulate actuarial tables -- it's often as much a best guess as a medical diagnosis. Given the aforementioned moral status of smoking it's likely to be where the doctor runs whenever the patient smokes.
Frankly, as with all taxes, sin taxes have problems associated with them. Besides, in my opinion its not really a sin tax -- it's an inelastic demand tax. Most of the things taxed in this fashion have a very high price tolerance point. Which means if the government really wants to strike gold they should abolish all of these taxes and tax health care.
