Monday, July 03, 2006

Sin Taxes & Hybrid Cars

Fellow JAJC member Charlie Hall made a side comment in the discussion on the previous post that brought to mind an interesting topic: "Sin" taxes. Sin taxes, briefly, are taxes that are placed on so-called "sinful" acquisitions, such as alcohol or tobacco. According to Wikipedia, they are most often used in cities to raise money for large projects, such as a football stadium.

I think sin taxes are wonderful, and should be utilized more often, albeit carefully. Large sin taxes cause black markets to pop up, much like large income taxes do. When Russia had an extremely large income tax rate, black markets flourished; when it lowered the rate by a large chunk, suddenly more businesses were reporting more of their activities.

But sin taxes are a bit of the best of all worlds: They encourage people to not waste money on goods or activities that are unhealthy for them and for others, and they discourage people from getting involved in those activities in the first place, which may help curb future addicts. However, they still leave people with the choice and ability to buy the goods they wish to if they so choose, retaining the rights of the individual.

I view it as a slight variation on the way the government treats hybrid cars. [For the sake of argument, I am assuming that people view smoking and drinking as unhealthier and more dangerous than using a regular car (as opposed to a hybrid vehicle).] 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. It would be unfair to "punish" everyone who owns a regular car by raising taxes on gasoline or on regular cars, especially gasoline: It is not the "fault" of car owners that almost all cars are made to run on gasoline, that hybrids are so expensive, that alternative transportation is not nearly as convenient, that this has been the standard since cars were invented, etc. Even if one would argue that people could 'do more', and it is nowhere near ideal, I doubt many would feel that people should be forced to pay an extra tax for using gasoline.

However, it does make sense for the government to offer incentives to those who are willing to sacrifice somewhat for a hybrid car. Hybrid cars are still far more expensive than regular cars, with similar models costing between $7,000 and $10,000 more than their non-ecological twins. They also haven't completely cut out the need for gasoline. A relative who worked in the Department of Defense who is quite the conservative (here's a blow to stereotypes) was considering getting a hybrid car last year; after figuring out all the extra costs versus the gas savings and tax incentives, the difference was still so high he simply could not do it. While the tax incentives in this case are not enough to completely make up for the difference (and larger incentives would likely prove to be too costly to the government), at least the small incentives encourage more people to consider hybrids and likely help a few make that leap.

Along the same vein, the government should consider more - but slight - "sin" taxes. I must emphasize that these taxes should be used very carefully... But they should be used. The amount of money people waste and the negative effect smoking and drinking have on the general public (drunk drivers, SIDS, lung cancer, etc.) is astounding. Taxes will force people to think a bit more carefully about what they are doing to themselves and their families. Were marijuana to become legal, that may also be a good candidate for a sin tax; perhaps a compromise could be reached to make it legal (something I have no opinion on) as long as there were a large tax on it to help discourage casual use. Gambling could be another target, though the nature of gambling might preclude the tax having much of an effect. Most of all, the savings to the people who decide not to smoke or drink would be a tremendous step in helping many families get out of poverty, and could provide even further savings to the government in terms of health care and the like.

The difference between hybrids and cigarettes is obvious. In the case of hybrid cars, the government needs to try and help convince people to drive hybrids over the current status quo of gas guzzlers via incentives. In the case of cigarettes, the government should no longer have to "convince" people to stop smoking. Those who are choosing to smoke are doing so despite knowledge of the health risks involved. Instead, the government should help create a disincentive to smoke - by hitting people where it counts, in the wallet. Those who still wish to do so may - but they are going to pay for it now, not just later.

The government should not be in the habit of 'forcing' people to get healthier or take on certain lifestyles; but they should be in the habit of helping to encourage those lifestyles which help everyone and discouraging those which do not. There is definitely precedent for this, such as tax breaks for married couples, and the incentives already in place for homeowners and hybrid buyers, and this is a practice the government should continue to expand.


Blogger Charlie Hall said...


Very nice post. You've just made the case for governmental interference in the market, and I can't say that I disagree with you at all on this one. Prepare to be placed in cherem by the right wing true believers. We on the left welcome all converts and refugees ;-).

On this Independence Day I'll just mention that in the area of health there is one for which the government of the United States has a very long history of coercion: George Washington himself required recruits to the Continental Army to be innoculated against smallpox. That action may have won the war. To this day the US mandates vaccinations for children.

Happy July 4!


7/04/2006 9:20 AM  
Anonymous Anonymous said...

Perhaps the government should tax Sunday morning television watching, to encourage people to go to church? Or a higher tax on movies to encourage people to read books? If you don't want to smoke, don't smoke. If you don't want to drink alchohol, don't drink alchohol. Why is this difficult? "The ability to tax is the ability to destroy". Why are you asking the government to further curtail freedom?
Your hybrid idea sounds nice if the governments role includes manipulating the market to discourage the sin of using gas. However, if you feel taxes should only be used to pay for common goods, hybrids should probably be taxed extra. Since they use less gas than non-hybrids, they aren't paying their share of the gas taxes (which should be) used to pay for road construction/ maintnance. Happy 4th.

7/04/2006 3:21 PM  
Blogger Charlie Hall said...

'discourage the sin of using gas'

This is exactly the kind of craziness that the nutty Right usually expounds, which the sensible Right (of which Ezzie is an example) knows makes no sense. Gas taxes, if they really are to pay for themselves, should also support the approximately one half of the US defense budget that is today devoted to ensuring that the oil supply from the middle east is not disrupted. (The other half of the defense budget, unfortunately, mostly consistes of pork barrel projects for the districts of powerful congressmen, and corporate welfare for defense contractors. And the truth is that gas taxes don't even pay the entire costs of roads in most of the United States -- local road maintenance has to be supported by local property taxes.) If Americans were willing to pay about $5/gallon for gasoline, permanently, it would become economical to produce synthetic petroleum from coal and to import petroleum from the Albeta tar sands. It is our unwillingness to change our ways that funds the Saudis, and indirectly, Islamic fundamentalism that results in terrorism.

It might also be nice if alcohol taxes would pay for the hospitalizations of chronic alcoholics, the social workers needed to put back together the families whose lives are destroyed by alcohol abuse, and the prisons needed for incarcerating the criminals whose actions were driven by their addictions. I could go on and on. Economists refer to these things that aren't captured by markets as "externalities". They are often hard to quantify but they are there.

And it is actually a *conservative* principle that unfettered freedom leads to disaster. Those of us on the sensible Left understand this, as do those on the sensible Right. The question is where to draw the lines and how.

7/04/2006 8:41 PM  
Blogger Ezzie said...

Anon - As I stated, the sin taxes must be used *very* carefully. There's a far cry between smoking and drinking, which have large and clear documented health risks, and activities such as the ones you mention. I'm not curtailing freedom at all, but rather encouraging non-destructive behavior. I think most reasonable people agree that having laws in place to prosecute those who murder and steal do not "curtail freedom" but protect it. Smoking and drinking are not nearly as severe, but they are actions which negatively impact others.

7/05/2006 1:24 AM  
Anonymous Anonymous said...

Why should gas taxes be used to ensure an uninteruppted stream of oil? Businesses should take care of that. The military can take care of its needs from income taxes. Did you suggest coal- the fuel with the most greenhouse gases- to replace oil? What would Gore say? :). Besides asking people to spend $5/gallon on gas, an incredible inconvenience for most people, I think the "starve the beast" method would only exacerbate the terrorism problem. The 90's had among the lowest oil profits in recent history while introducing us to this wave of terrorism. 9/11 cost thousands of dollars to execute, not billions. "Commerce dimishes the spirit, both in patriotism and military defense." Making those countries poorer provides a larger recruitment pool of hostile, unemployed youth, the backbone of fundementalism. And while some oil states, such as Saudi Arabia, do fund terrorism, smaller profits would not likely deter them from this (the 90's) and could very well introduce new terrorist funding regimes.
Maybe if taxes were lower they could afford rehab for themselves. But seriously, without getting into the crazy right-wing idea that paternalism encourages irresponsible behavior, what percentage of alchohol consumers require these government provided services? It's miniscule and shouldn't be used to punish the vast majority who either drink reponsibly or pay for their mistakes.
I didn't say anything about not having laws against murder and theft, please don't put ideas into my mouth. However, having a blanket tax against smoking and drinking punishes both responsible and irresponsible acts. Do I harm others by drinking and smoking in my house? No. Do I harm others by smoking and drinking in a bar? No. If I then go out and drive, I do pose a threat and there are laws in place to stop that. Not encourage good behavior, but to stop behavior that endangers other. If want the government to discourage behavior with clear, documented health risks, why not tax wearing shorts in the winter? This can go to pay for the externality of hospitalization the person needs after being smacked by his friends for being stupid. Or for pneumonia.

7/05/2006 7:51 AM  
Anonymous Anonymous said...

And it is actually a *liberal* principle that liberty is paramount and limited government is the best kind of government. Those of us who have been relegated to the label "classical" liberals still understand that.

7/05/2006 8:03 AM  
Blogger Ezzie said...

I'm not sure what you were saying in your first two paragraphs. I specifically am against gas taxes, for example...

However, having a blanket tax against smoking and drinking punishes both responsible and irresponsible acts.

Actually, I specifically did not say a blanket tax, and I think it should be a small one for a variety of reasons.

Do I harm others by drinking and smoking in my house? No.

Considering many cases of SIDS happen in the house, perhaps you could. But that's really not the point: The point is that the actions are generally unhealthy and the idea is to discourage them, period. Are there times where it doesn't matter? Of course. But that's true for many laws. Should I not be punished for speeding on an empty road?

Do I harm others by smoking and drinking in a bar? No.

Actually, yes. Second-hand smoke?

If I then go out and drive, I do pose a threat and there are laws in place to stop that. Not encourage good behavior, but to stop behavior that endangers other.

Granted. However, the laws in place clearly are not enough. Many people simply feel they won't get caught or nothing will happen. Perhaps the extra expense is another way of attacking the problem.

If want the government to discourage behavior with clear, documented health risks, why not tax wearing shorts in the winter? This can go to pay for the externality of hospitalization the person needs after being smacked by his friends for being stupid. Or for pneumonia.

Cute. But there's a marked difference between activities which also affect others and those which do not.

7/05/2006 11:09 PM  
Anonymous Anonymous said...

The first two paragraphs were a response to the comment before yours. Sorry for the confusion.
"Blanket tax" doesn't refer to the rate of the tax, but to its ubiquity. I think there's a misunderstanding there.
The harm I refered to is harm without consent. The reason speeding on an open road is illegal is because of the great potential that its not as open as you think and that person would probably not agree to the risks of speeding. On the other hand NASCAR's legal because everyone's aware of the risks and agrees to them. If someone smokes in a house with children, they should be liable for parental negligence. Otherwise, if all parties are aware of the smoking and accept the smoking, while it may be unhealthy, who is the government to decide that the unhealthy consequences outweigh the joys of smoking. Similar to the second-hand smoking. Patrons of a smoke-allowed bar can decide for themselves whether or not to accept the second hand smoke.
Perhaps the extra expense is another way of attacking the problem
However, the vast majority of people drink responsibly, and this would punish them for something that others do.
I'm not sure why someone contracting a deadly, contagious disease like pneumonia is less of a drain on other people than gambling.

7/06/2006 9:00 AM  
Blogger Ezzie said...

I'll admit gambling is trickier than the others.

All in all, solid points.

Otherwise, if all parties are aware of the smoking and accept the smoking, while it may be unhealthy, who is the government to decide that the unhealthy consequences outweigh the joys of smoking.

That's similar to what I said. That's why it should never be banned, etc.

I think we agree on the logic, but disagree on how far that takes it. I agree that people can choose what to do, and the government should not be telling them they cannot do it. However, I also feel that it's within the government's reach to try and encourage or discourage certain behaviors (WITHIN REASON - I don't think that taxing to unreasonable levels should be done). You seem to disagree, taking the personal choice all the way to the point where the government can't do anything to affect that choice.

7/06/2006 10:05 PM  
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