Founded by Drew Pearson 1932
The sin tax sin
By Douglas Cohn and Eleanor Clift
WASHINGTON – The sin tax sin is that in only works if people sin. Now, smoking, drinking, and gambling may not be sins in the biblical sense, but they fall under the sin tax umbrella.
If the federal cigarette tax is increased by 94 cents per pack, which President Obama has proposed to pay for universal pre-school education, the budget office says it will raise $78 billion over 10 years, and cut smoking rates. From the government’s perspective this would be a win-win situation, but from an ethical perspective it is lose-lose.
When Obama first took office in 2009, he signed legislation to boost the federal tax on cigarettes by 62 cents. The money was used to pay for children’s health insurance, which passed Congress with bipartisan support. But the sale of cigarettes dropped by 10 percent after the price boost, according to the Campaign for Tobacco-Free Kids.
Smokers are an easy target, yet how high can the cigarette sin tax be raised before running into diminishing returns? A 10 percent drop in cigarette sales means lives are saved, but revenue is lost, a scenario that could theoretically be repeated until only people willing to pay $20, $50, or $100 a pack brings the whole pyramid down.
With all the pressure not to smoke, people who persist anyway tend to be from a lower socio-economic group, which raises moral questions about imposing a further economic burden on them. Sin taxes tend to be highly regressive, with lower income people paying much more than the better educated and better off financially.
The same thing can be said for the lottery. People who buy lottery tickets tend to be those who can least afford them. The rationale here is that people will gamble anyway, so the state may as well get a cut of the money. Some states dedicate the funds from state lotteries to education, and with the current aversion to raising taxes, it’s just about the only source of money that state and local governments can ramp up.
Still, the idea of taxing something we don’t want people to do – and then relying on the money to fund something else, however worthy – is a bit of a shell game.
The problem is that once we tax something beyond a moderate amount, there can be a backlash. People will either stop using the product, or high taxes will encourage tax avoidance and abuse or even foster rebellion. There’s already a black market in cigarettes, and bootlegging as means of avoiding alcohol taxes is as old as the country. In 1791, farmers who used excess corn and grain to make whiskey faced a new targeted tax on their brew, and they responded in what came to be known as the Whiskey Rebellion. In 1794, President George Washington marshaled an army and initially led it toward western Pennsylvania. The rebels dispersed without a fight, but two points were made. Federal authority was established, but the voices of the people were heard. The tax was revoked eight years later.
In the end, the sin tax concept is simply wrong. It makes the government look hypocritical when school children are told of the evils of cigarettes, alcohol, and gambling, and then the government appears to sanction these activities by benefitting from them through taxation. It is the sin of the sin tax.