As the only two certainties in life, we shouldn’t be surprised to find that both death and taxes share a mutual connection: Sin. While death usually make for more interesting reading, Pascal-Emmanuel Gobry has a thought-provoking discussion of “sin taxes” in his post ” Let’s subsidize cigarettes, shall we? ” Despite the satiric title, Gobry’s concluding point is quite sensible:
One of the reasons I don’t think of myself as a libertarian even though they’re the group whose actual policy preferences most closely mirror mine is because of things like this. Legislation reflects a society’s moral values. In fact, it should reflect a society’s moral values, consistent with individual freedoms, because it is what a democratic polis is all about: a nation deciding by which rules it wants to live.Government can’t and won’t “just get out of our lives”, simply because what you describe as “getting out of our lives” isn’t the same thing as what I describe as “getting out of our lives”, and, until Jim Manzi finally succeeds at creating evidence-based social science, there is no scientific way to decide what government should or should not do — and nor should there be.
So if you want to disincentivize smoking through sin taxes, that’s perfectly fine. It’s okay to have public policy that disincentivizes bad things just because they’re bad, without having to make budget projections over the next 30 years. I’m willing to pay extra to feed my addiction. But don’t lie about the real reason you’re doing it.
While I agree with Gobry that disincentivizing smoking through sin taxes is legitimate and that we should be honest about our reasons, I think it can be taken too far. Taxation shouldn’t be used as means of instituting a Healthocracy in which the government uses the tax code to enforce a particular view of health-based morality. From a purely moral point of view, sin taxes are an illegitimate means of controlling the behavior of the citizenry. We should not rely on the state to use its tax code to intervene in an area that is the responsibility of society’s mediating institutions.
From a purely economic standpoint, though, sin taxes make more sense. This form of taxation can be an effective means of reimbursing the state for the cost incurred by participating in a particular negative behavior that it wishes to disincentivize (there is a moral component to disincentivization, of course, but that is true of all legislation).
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 rate for a sin tax on tobacco. 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 the expenses they must pay because of their citizens’ nasty habit.
In essence, the tax would be akin to a “user fee.” Rather than making a moral judgment about a specific unhealthy, though legal, behavior, the tax would simply shift the cost to those who participate in the activities. This seems a fair approach. While people have to wait until death to collect on the wages of sin there’s no reason the government shouldn’t be able to collect the tax on sin in this life.
