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The True Sin of Sin Taxes

The ironic truth hidden behind sin taxes is a particularly ugly one.

by
Jazz Shaw

Bio

April 15, 2014 - 11:46 pm
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The progressive Left’s impulse toward adventurism in utopian social engineering via government fiat has a long and glorious history in the United States. It is also, unfortunately, one of the most reliable tools traditionally employed by government at large – which rarely has any use for either liberal or conservative dogma – to achieve their chief ambition; the fattening of their coffers with more tax dollars. And you would be hard pressed to find a more systemic example of the intersection of these two worlds than the subject of sin taxes, particularly when it comes to the legal sale of tobacco and alcohol products.

On the surface, this unholy union sounds like a best of both possible worlds solution for all societal ailments. Those with a vested interest in seeing a nanny state control the “unacceptable” practices of boorish lowbrows who refuse to toe the party line dictated from the corner of Haight and Ashbury believe that a drastically increased tax on tobacco will stop people from smoking. Their compatriots who claim an interest in the nation’s economic welfare proclaim that fewer smokers will result in less sick people, thereby reducing strain on the health care system. Meanwhile, government agents applaud wildly, proclaiming their immense admiration for the laudable goal of allowing them to tax a product at roughly 800% of its actual value in the interest of accomplishing whatever the heck it is that you people are jabbering about.

So, as all the cool kids on The Twitter are wont to say these days, what could possibly go wrong? Let’s address the above points a bit out of order.

Do higher sin taxes on cigarettes actually result in some vast new influx of government revenue? Recent history would dictate otherwise. In Chicago, Cook County residents are paying tobacco taxes of nearly five dollars a pack, second only to New York City. This brilliant scheme, enacted over the last few years, was supposed to not only reduce the rate of consumption by smokers, but solve a myriad of budget problems facing the Windy City with all of that hot new tax cash. But after a lengthy period of study, not only were smoking rates not going down significantly, tax revenue was falling many orders of magnitude short of projections. The reason? People were smuggling tobacco into the state at an alarming rate.

Taxes in nearby Indiana were less than a dollar per pack, and in neighboring Missouri they are only seventeen cents. The results were easily predictable without needing to call in a crack team of anthropologist and economists. Business (and cash) was leaving the state and the police were busy pulling over cars with too many Pall Malls in them or searching neighborhood convenience stores for illicit product.

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30 weeks ago
30 weeks ago Link To Comment
It is a mistake to think that cutting out smoking will reduce medical costs by any great amount.
In the end, all of us will have a terminal illness or event. For most, it will involve a year or a few years of increasingly expensive medical care. It may occur earlier among smokers but it happens in the end to all but the few who die suddenly.
31 weeks ago
31 weeks ago Link To Comment
Your evidence suggests there is an optimum tax rate for the sinful items in order to raise the maximum tax revenue and to reduce the maximum number of sinners. You might maintain that the optimum is zero but I doubt it. It is probably 1% higher than the next door state or the same as all the next door states.
31 weeks ago
31 weeks ago Link To Comment
Consider the "lifetime costs" of smokers versus non-smokers. Social Security and Medicare costs for each group. Smokers die at a younger age as a rule. The difference in life expectancy of the two groups is at least several years if not more. Are smoker lifetime medical costs higher than non-smokers? With the average Social Security benefit at about $1200 a month, the non-smoker will draw at least several years more benefits than the smoker will live to draw. Medicare costs are more complex in that the smoker may collect more benefits even if their life span is several years shorter. So far as I know, no one has collected accurate statistics on the lifetime costs of smokers relative to non-smokers. It does however raise some questions that need answering...
31 weeks ago
31 weeks ago Link To Comment
Tobacco is the perfect thing to put a sin tax on. It's almost impossible to kick the habit once you start, so you will always keep paying for it no matter how abusive they make their tax. Why on earth would they outlaw it?

That's how I see it.

I'm no smoker and find the habit abhorrent, but I won't stop others from getting into it if they're determined. I think if there must be a "sin" tax on something like tobacco, the only things the revenue should go to are things directly benefitting the people paying the tax - say subsidizing a smoker's insurance pool or smoking cessation programs. That way, if the sin tax ever did accomplish it's stated purpose, the state wouldn't have to start finding other sources of revenue.

Look at what happens when the sin tax on fuel actually started to work and people started to drive less, buy hybrids and other wise put a dent in the fuel tax revenue, states starting complaining about their loss of revenue and started looking for other ways to punish drivers to make up the lost revenue. If done correctly, they never would have missed the money and wouldn't have needed to propose little black boxes to tax miles driven or whatever other crazy revenue schemes they were coming up with.
31 weeks ago
31 weeks ago Link To Comment
State fuel taxes remained the same, but less fuel was used. So there was less money to keep the roads in repair. Either make the fuel tax a percentage of the cost of a gallon of gasoline, or looking forward into the future, find a better source of money to pay for maintaining the infrastructure
31 weeks ago
31 weeks ago Link To Comment
In the face of liberals demonizing tobacco, some years ago a Republican state legislator (in Colorado, as I recall, but perhaps somewhere else) proposed an outright ban on tobacco in that state: no sales, no imports, no possession. He called the bluff.

The schools -- the schools -- fought the ban. Because they wanted the tax money.

Yeah, keep telling me how intrinsically evil tobacco is....
31 weeks ago
31 weeks ago Link To Comment
what I never understand is how the government can tell us that tobacco is harmful, force warning labels on the packages, and then continue to accept the revenue from the sale of the products.

Seem to recall that Alar was deemed harmful and removed from use.

But guess you can't have the govenrment in bed with big tobacco blamed for and held accountable for usage.
31 weeks ago
31 weeks ago Link To Comment
Which raises the question of what justification is there for tobacco taxes? Higher health care costs? No one has yet done the calculations so far as I know regarding whether or not smoking adds to total lifetime costs or not from the standpoint of public financing of such costs.
31 weeks ago
31 weeks ago Link To Comment
I have a note above. I don't have rigorous research but I do know that nearly all of us will need costly medical care in the last year or two of our lives. That's true whether you smoke or don't.
31 weeks ago
31 weeks ago Link To Comment
but we need people to smoke to pay for health care for youths,

But in reality, is it a crime for a person in one state to buy a product in another state. Happens all the time.
31 weeks ago
31 weeks ago Link To Comment
Howdy barry1817
Is it a crime? This is a perfect example of malum prohibidum rather than malum per se. I firmly believe you have the right to purchase what you choose in one state and transport it to another state. Even the states believe this unless you choose a product they want to tax heavily. Then they quit believing it.
31 weeks ago
31 weeks ago Link To Comment
There is an obvious...and lucrative...way to deconstruct this abomination.

Strategically located polises would see an absolute bonanza if they slashed their "sin taxes" to a fraction of what neighboring high-tax polises held.

Maryland is a good example of this. Only a Marylander who is unable to drive or use public transit is going to buy cigarettes in the Old Line State when Virginia is a short drive or train ride away.

Indian reservations have also made fortunes asserting their powers as Treaty Lands being independent of state and city nonsense to sell smokes and liquor below the cost of the surrounding jurisdictions.

And for those like New York City located on the seacoast, the reach of Gracie Mansion and Albany ends just 12 miles offshore.
Take a boat ride and open the slop chest.

Wholesale price on a carton of Marlboro "Cowboy Killers" is just under $15.00 from a Houston Duty-Free supplier.

You do the math.

And as the customers trample each other to come in and buy their LEGAL products, the smart polis makes bank while the stupid polis goes broke.
31 weeks ago
31 weeks ago Link To Comment
Those in government say smoking is the biggest killer since the Black Plague. The way to stop it is to arrest the traffickers. They happen to be those in government who take 80 per cent of the proceeds, give or take. Put them on trial for murder and you'll hear a new song. Oh, life expectancy has been going up by leaps and bounds. We are not guilty of anything. And they'll walk on that too. I'm a law and order guy but this is one area where I cheer for the smugglers because they are helping poor people who are given an addictive substance by government so it can rob them.
31 weeks ago
31 weeks ago Link To Comment
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