Soccer Dad

Government's entitlement

Over at Just another Jewish Conspiracy, SerAndEz sings the praises of sin taxes.

I don't see sin taxes the same way he does. Especially not tobacco taxes. It's not that I like smoking; I don't. Tobacco taxes (and lawsuits) give politicians the chance to pose as protectors of the citizenry. But they're not. They're after a revenue stream.

As Jeff Jacoby put it

One of the great perversities of the governmental war on smoking is the extent to which government profits from smoking. Jacob Sullum highlights the astonishing numbers in the May issue of Reason magazine. Last year, the tobacco industry's profit on a pack of cigarettes sold in the United States was 23 cents. On the same pack, the federal government collected 24 cents in taxes and the states collected an average of 36 cents. Incredibly, 72 percent of the net proceeds from tobacco sales goes not to Big Tobacco but to Big Government.

If smoking is as evil as portrayed by politicians they shouldn't be taxing tobacco. They should be banning it. The only reason smoking isn't banned is because it is the goose that keep on laying golden eggs for politicians who can't get their hands on enough tax revenue.

Here's an excellent illustration of that principle from "Addicted to Tobacco taxes"

Instead, the “cash-cow” coalition signed a national settlement that protected the profits of the tobacco giants so they can be milked periodically to replenish depleted state coffers.

Now that same coalition is promoting Proposition 303, a statewide referendum on the November ballot to increase Arizona’s cigarette tax from 58 cents to $1.18 per pack—the nation’s fifth highest rate. The goal of 303 is to pay for a laundry list of programs, like expanded health insurance and funding for trauma centers. Those programs, desirable or not, are mostly unrelated to tobacco prevention.

...
In 1995, Arizona’s excise taxes were 58 cents per pack. According to Harvard economist Kip Viscusi, the state spent 1.12 cents per pack on tobacco-related medical care, and lost 1.55 cents per pack in payroll taxes due to smokers’ early mortality.

Thus, the 58 cents per pack excise tax was more than 20 times the combined tobacco-related cost to the state of 2.67 cents. In short, smokers have more than paid their way.

Additionally the author of the essay points out that smokers are disproportionately poorer than the rest of the population so this is a regressive tax, to boot.

"Sin tax" is a label that confers a nobility to an enterprise that is little more than legal extortion.

I'm too cynical you think? Maybe. But lets consider another part of Sin tax post, the notion that government does good by making hybrid cars more affordable through tax credits.

In the case of hybrid cars, the government offers a tax incentive for people to buy a hybrid car over a regular car, by allowing a small tax deduction for those who own a hybrid car.

Yes it's wonderful that government seeks to make us more environmentally responsible. Yes it is truly noble. But what happens when government actually succeeds in this effort?

Let's pretend someone waves a magic wand and turns every car into a fuel-sipping, gas-electric hybrid. What difference would it make? The air would be cleaner.

Oil imports would drop.

And the transportation budgets of Oregon, Washington and almost every other state would deflate like a punctured balloon.

In the end what's important is not whether behavior has been modified but whether or not the government gets the money it believes it's entitlted too. "Sin taxes" may sound good and noble, but in the end they're just another phrase meaning "government entitlement."

Technorati tags: Sin Taxes, Hybrid Cars.