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.
In New York – the King Kong of tobacco taxes – a recent study carried out by the Mackinac Center for Public Policy, found that a staggering 57% of all cigarettes smoked in the Empire State are illegally smuggled in to avoid taxes. Scott Drenkard, an economist for the Tax Foundation, described the phenomenon as a difference between the law of supply and demand and the law of replacement. The demand wasn’t going away, but the cost of the government stipulated supply had outkicked its coverage. Citizens who might not normally turn to lawlessness in other circumstances were able to justify skirting the regulations when it cut the price of feeding their habit in half.
Lest you think that this pattern was restricted to small time smugglers and individuals driving a few hours to stock up on Marlboros for the month, the exception to the rule is proved in the equally stringently taxed state of Maryland. Bassam Kiriaki, a 46 year old accountant, was arrested after smuggling more than one million dollars’ worth of cigarettes and is now facing serious jail time on federal charges.
Aside from the failure to increase revenue, what about the beneficent effects on society from curbing smoking through high taxes? As noted above, some number of smokers may decide to cut back or stop, and that’s a good thing. But overall, the majority do not and seek the other remedies discussed here to continue in their habits. In fact, recent polling has shown that the poor are both the least likely to quit the habit and the most likely to feel the pain from higher sin taxes.
But proponents of this form of social engineering will maintain that the goal is worthwhile, as a bit of suffering now will be rewarded in spades when you don’t have to pay all of those hospital costs later. Is it true? A dark side of the conversation emerges when Scott Drenkard engages this subject in the previously referenced interview. He allows that smokers who become ill eat up significant resources in the health care system. But it’s also true that they tend to die much younger. And while he takes great pains to assure us that he’s not suggesting this is a good idea, their premature deaths save Social Security dollars and makes cigarettes a net gain for the country.
There’s a twisted bit of logic for you to wrestle to ground when debating such a mundane topic as tax policy, eh?
Does government even believe that stopping the use of these products is in the national interest and for the protection of the people? If they do, their resolve is weaker than the knees of a school boy approaching a girl at his first school dance. Assuming tobacco is a poison to be kept out of the hands of the citizens – and to be sure, it can be when taken in sufficient quantities over long enough periods of time – then why is taxing it even on the table? A government dedicated to eliminating this plague from the body of the nation would simply ban its use and possession entirely. We’ve done it with heroin, cocaine and a host of other dangerous substances and in the case of cocaine there’s actually a medicinal use for the compound. Why should cigarettes get a pass? As we work our way through this puzzle today, the answer may be coming into focus.
Many of these same arguments hold true for alcohol, though not in the same volumes as with tobacco. But the end effect and corresponding lack of efficacy for state and local governments is the same. The utopian social engineering goals of the progressive Left are not met, and in fact the poor – who are ostensibly championed by the Democrats and reviled by Republicans – bear the brunt of the hammer fall. Projected state revenues fail to rise, and law enforcement resources wind up being diverted from finding and prosecuting actual criminals to chasing around housewives, minimum wage workers and small business owners who are trying to cut some corners and escape the heavy thumb of Big Brother.
So why do we continue on this path, accelerating rather than pausing to determine where the contraband cart is running off the rails? The answer is in two parts. First, this is an easy target which will produce minimal backlash. Smoking – and to a lesser extent drinking – is frowned upon by the right people in society. If taxes are raised on such sinful products, no champion of any standing will rise to oppose them. Compare this, for example, to fatty foods. It is almost equally agreed upon in the medical community that big, greasy, fatty meals and sugary snacks full of frosting covered carbohydrates are a major contributor to long term medical woes which drain the economy and burden the health care system just as alcohol and tobacco do. But you just try putting a tax of six dollars on every Krispy Kreme that rolls out of the hot oil fryer. The peasants would be up in arms and legislators who supported such a socially conscious move would find themselves on the unemployment lines come November.
The second part of the equation is that they simply can’t help themselves and they know they can get away with it. And in this case, they are the happy social warriors who believe everything will eventually be put to rights if we can simply find a government big enough to run all of our lives for us. They are willingly abetted in these efforts by state and local legislatures who simply can not pass on one more grab at the brass ring. If you offer them an excuse to raise taxes, they simply can’t say no. And they won’t. Ever.
The ironic truth of the sin tax is that the real sins are being committed by the taxers, not the smokers and drinkers.
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