Superfluous Sin Tax Damns More Than it Saves

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Author: Kevin Abrams

Sin taxes, also known as sumptuary taxes, are an often-used, under-debated and generally accepted practice among governments that consists of levying taxes on goods that are considered socially undesirable, such as tobacco, alcohol and even soda. These kinds of policies are enacted on a regular basis at local, state and federal levels, and are primarily used to curb behaviors associated with vice and general unhealthiness. While these policies are, I hope, grounded upon good intentions, and have supposed benefits (the revenue gained is typically directed towards government programs), it should be recognized that, overall, they are destructive, inefficient and, from a humanitarian perspective, unjust.

To understand the practical arguments against this kind of legislation, one should heed the words of 19th-century economist Frédéric Bastiat, who argued that the good economist always takes account “both of the effects which are seen, and also those which it is necessary to foresee.” That is, while the typical onlooker judges an economic policy solely by its direct (visible) results, the true economist must look also at its more indirect results, which would be referred to as “unintended consequences” in modern political discourse. As it turns out, sumptuary taxes carry with them several of these unseen, unintentional effects.

Regardless of how the bill is written, a tax increase always falls upon consumers, not just producers. Even if a tax bill decrees that the entirety of the tax increase be paid for by producers, tobacco companies simply raise prices to cover the increased cost. Since, in the case of proscribed goods, consumers tend to be disproportionately from the lower and working-classes (a study from U.S. News & World Report found that 1 in 4 smokers fall below the poverty line), the tax is, in its very nature, a regressive one.

Sumptuary taxes also have something of a paradoxical nature with regards to their end goals. As stated above, these policies have the dual purpose of curbing unhealthy behaviors and funding government projects. If one thinks about this, however, it should be obvious that these goals involve something of a trade-off: The government becomes reliant upon the very behaviors they’re trying to reduce!

Consequently, sumptuary taxes usually provide diminishing returns. Over time, consumers respond, curtail their bad habits and, in so doing, pay less in taxes. Because of all this, sin taxes make for an unreliable source of government revenue – especially when they’re used to fund important projects.

However, the main problem with sin taxes, and sumptuary laws in general is the political implications they bring with them. The underlying assumption behind these policies is the same one that brought us Prohibition in the 1920s: the idea that legislators reserve the right to regulate personal behaviors and habits that they happen to disagree with. It’s a condescending approach that creates little more than resentment from the people whom it truly affects. When people struggle with smoking, drinking or even junk foods, these are not simply problems unto themselves. More often than not, they are the symptoms of greater and more complex problems that people face in their lives. Simply placing an additional cost on these people’s indulgences cannot help them. It can only stress them further.

Kevin Abrams is a junior Politics major. He can be reached at kabrams@oxy.edu.

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