Rejoice! Although this SMH headline is worded more politely, it harks back to a gentler, nylon-clad era, when suburban newspapers would shriek at the iniquity of Winnie Reds rising to over 75 cents a pack.
So dear readers, here is your false-dichotomy debating topic of the day:
So-called ’sin taxes’ on certain legal substances are an appropriate way of recovering the cost of preventable diseases and other social costs associated with these substances. In fact, they’re such a good idea, we should extend them to carbon, jet travel, coffee-drinking, meat, tofu, breathing and anything else that isn’t nailed down. And nails too.
-or-
‘Sin-taxes’ are an unacceptable form of nanny-state coercion and in effect a regressive tax upon low income earners who are subjected to middle-class morality everytime they pay more for the only simple pleasures they can afford, while the law-makers enjoy tax-privileged junkets and resort holidays…
Discuss.
(Name-calling will be subjected to a non-deductible swear-jar levy.)
What are the ex-ministers going to do with skyrocketing cigs and beer, and a drop massive drop in their income? Some can’t even afford to pay the loan on their houses. Ex-ministers feel the pinch
Indulging in some amateur ethical philosophy, the consequentialist in me says that neither view is correct, as only the outcomes can justify the legislative programme.
So extrapolating to deduce that, say, taxing the fat content in food would have a beneficial effect is questionable.
Unfortunately these consequences - in the case of booze and cigarettes at least - are framed by policy-makers only in terms of broad public health statistics. Any costs in terms of enjoyment of life, loss of self-determination, etc. are discounted.
Some “sin-tax” policies are decided in more of a vacuum of consequential analysis than others, and some of these might need to be reexamined. On the other hand, a careful analysis of the effects of other types of public behaviour, that have not previously been the focus of investigation, might uncover more fruitful ground for regulation.
I am closer to agreeing with option a) than option b), although I don’t think anybody really believes that taxing alcohol or cigarettes really significantly reduces people’s abuse of these substances. It’s just an irritation for those who indulge, and one that is quite easily ignored and forgotten by those who indulge frequently.
The ’sin tax’ that apparently finances NSW government, is gambling.
This pointless activity is sometimes described as a tax on the stupid.
So how about a single tax on stupidity in general, big donked hoon mobiles, cosmetics, fashion, insert personal bete noire here…
Having garnered mountains of revenue, let’s look at how to spend it -
(a)education (b)health (c)infrastructure (d)SES (e)..err.. that’s all folks.
If we didn’t socialise health-care, etc. we wouldn’t have a need to recover cash by reference to fascist concepts like ’social costs’. The phrase ‘fruitful ground for regulation’ is chilling. How’d I do?
BBB
Forget about “sin”, any consumption tax (sales tax, excise, GST) is regressive, in that it falls more heavily (in % of income) on low-income persons.
Q.1 “The Australian tax system has beciome less progressive [more regressive] over the last 40 years: discuss”.
BBB: I was being a bit silly with that phrase. I still will here. But it can’t be denied that taxing cigarettes is the totalitarian/utilitarian combo in full flight: “we know what’s best for you” regulation.
Once you’ve agreed with one such instance of policy on what grounds can you object to its extension to some area where it “works” even “better” (that is, fewer people cost the public purse by dying from lung cancer or whatever)?
Or does “we know best” policy-making have to be restricted to a certain maximal proportion of all social policy?
See, the trouble is that as social animals absolutely everything we do affects other people. So the old JS Mill bit about “you’re free to do whatever you want so long as you don’t harm anyone else” in practice leads to a state where what is not forbidden is compulsory (because everything we do might possibly harm someone else).
I reckon you’ve got to take the view that the harm to others must be significant, demonstrable and reasonably direct before you can justify banning or even taxing ‘bad’ behaviour. So I don’t support compulsory seatbelt laws (except for children); the “health costs” argument is too vague and indirect. I do support cigarette taxes because the annoyance to others is direct and because of the passive smoking issue. But I wouldn’t justify them on the grounds of damage to smokers themselves.
Yeah Tom, I was being a bit over the top, too. After all, it’s false dichotomy time.
Ambigulous, it is possible to have a progressive consumption tax. But you’re right - the taxes you have nominated are clearly regressive when considered alone.
BBB
An argument over “sin tax” represents a stunning victory for civilisation.
Instead of locating morality in the use of intoxicants, stimulants, and other addictive drugs, you’re primarily concerned with the philosophy of revenue-raising, and making it efficient and ethical. Sin is assumed.
The muscular Christians of the nineteenth century are weeping tears in their graves and I, for one, am happy.
Thanks BBB.
Yes, for example a new tax on purchase of yachts with price > $2 million, may be progressive.
Consumption taxes on ciggies, beer, spirits, basic food, fuel, etc are regressive I think. The bloke on $300,00 p.a. does not drink >10 times as much beer as the bloke on $30,000 p.a. QED
The MSM focuses on income tax rates, to the detriment of lower-income folks who are paying too much tax (through consumption taxes, poll taxes) but aren’t aware of it.
Taxing externalities (or regulating quantities by auctioning permits for example) is a good idea when there are considerable environmental or social costs. The problem is that any tax like this is regressive. Therefore a portion of the money raised should go back to low income earners.
I suppose I have sin taxes to thank for making me a non-smoker. I did take it up in Year 9 to be ‘cool’, but it was absorbing all my pocket money, so had to quit.
Externality charges are a good thing, as Peter Wood points out, but we have to be careful that there really is an externality that can’t be internalised any other way.
“it harks back to a gentler, nylon-clad era, when suburban newspapers would shriek at the inequity of Winnie Reds rising to over 75 cents a pack�
Yep, governments sure have learnt how to make us feel guilty since the original sin-tax was levied.
The joys of chop-chop. It’s cheap, chemical and tax free. Chop-chop cuts governments and tobacco corporations out of the picture. Chop-chop provides a cash income for enterprising latter-day moonshiners who plough their ill-gotten, non-traceable income back into the economy.
It’s “win-win� for smokers and communities; and “lose-lose� for governments and corporations.
Disclaimer: under no circumstances should these observations be interpreted as encouraging consumers to act outside the law.
WARNING: Smoking tailor-mades is damaging to your wealth.
A corollary to the fact that “sin taxes” are by nature regressive is that the real cost of maintaining your vices in the face of government opprobrium is less for the wealthy.
Here’s a question, just for the sake of background: on what were the earlier, older, historically (one assumes) lesser-amount ’sin taxes’ predicated?
My unfounded assumption is that, since things like bathtub gin and backyard moonshine are potentially fatal right on first consumption, the state had a compelling interest in standardizing the terms of production and quality certification, and a small tax is defensible both to cover the costs of certification and also, as it were, to lend the procedure a degree of gravity and seriousness. I can’t figure out how that principle would extend to tobacco, which just can’t kill you on the spot the way poison moonshine could. Is it just slippage? Or maybe the assumption is historically wrong? Why are alcohol and tobacco lumped together, conceptually, but not other things?
The idea that sin taxes are justifiable because they defray the health costs from greater risk exposure seems to me, on the face of it, to be yet another step down the yellow brick road of silliness. All actions taken by humans on earth have contingencies; life’s a risky business. Perhaps the folks making this argument ought to re-read Borges, ‘The Lottery in Babylon,’ to see where this sort of thing leads. Or else, if they are serious about this argument, then I would want to see the specialized hospitals for tobacco- and alcohol-related diseases, built expressly for such patients, and only with these stipulated revenues. Otherwise they’re not being terribly serious.
The power to tax is one of the strongest powers a government can take on. It seems to me that people ought to, at the very least, be in the habit of being extra careful and circumspect about the kinds of powers they relinquish to a government. The law of inertia being what it is, etc. etc. Talk about cultivating dangerous habits: lazily consigning powers to government, without careful thought, causes many more deaths than drinking and smoking.
So where is the morality in government making so much money from nicotine addiction and then blaming the addict?
There is also a pointy-headed economics argument (going back to Ramsay who argued it out with Keynes in the 1930s over dinner) that the most efficient way to levy tax (where efficiency is measured by the deadweight losses imposed by the tax) is to tax goods that have highly inelastic demand. This suggests that taxes on addictive activities are efficient as revenue-raising measures.
To translate to non-economics:
Basically what this means is that people don’t care what you charge for some things, they will stil consume them (and get the benefits of consumption) in (almost) the same quantities as they would without the tax. Addictive goods fall into this category.
For other goods, a big increase in prices (due to consumption taxes) leads to a big fall in consumption of the good. These distortions reduce the overall allocative efficiency of the economy. And allocative efficiency is what makes the free market so good.
So, if you tax things that people are going to consume regardless, you raise the revenue with the smallest possible distortion of people’s consumption patterns.
My heart does not bleed for Messrs Abbot, Downer and Hockey. Let them eat cake. My heart does bleed though, for those people on Newstar4t who were breached and left starving by the Howard Government. Some ended up homeless, with children. Only 16% of people bresched were found eligible for the emmergency provisions JWH put in place to make sure they didn’t starve, and most of them were breached by Abbot’s privatised job placement centres because the job providers were terrified they’d lose their contracts if they didn’t breach them.
On the sin tax - as a smoker, (infrequent comparative to what I used to be - fine, butr provide nicotine replacement therapies free (of course subsidised by the tax payer). If you did that, more people would stop smoking, and ultimately there would be a massive saving on the health budgets. In any case none of us have the right to sit in moral judgement on anyone who commits social peccadiloes.
AGNGG - anyone with a sense of smell can tell when a batch of spirits is poisonous enough to kill in one go - it doesn’t smell like ethanol any more. Little traces of metho, isopropynol (sp?) etc do turn up in any fermentation, but a good still will get rid of most of them and they are in any case permitted up to a certain concentration in certified legal hooch.
I dunno if alcohol and tobacco are really linked conceptually - the salient thing they share is legality. The social cost of alcohol adds hugely to the health cost, while for tobacco it’s mostly just health - but this includes the health of innocent bystanders.
Is there research that suggests increasing ’sin taxes’ saves lives? If that’s the case, then I guess I all for this for a nanny statism.
take two -
last sentence should say
I’m all for this form of nanny statism
Yes, Required, Ramsay taxation implies the efficient rate is inversely proportional to the price elasticity of demand. But it should also be increasing in the income elasticity of demand (for progressivity).
Unfortunately price inelasticity and income inelasticity are strongly negatively correlated - after all, the whole point of having more money is to have more choices in what you consume. So efficient commodity taxes tend to be regressive and progressive commodity taxes tend to be allocatively inefficient.
Evidence-based safe medical solutions which ideally work close to 100% of the time are the answer. Maybe the tax money could go into researching them.
The smoking and health mob cut their own throats when they advocate magical thinking as therapy. Doesn’t work in any other medical setting. No-one has ever seen, identified or measured a “willpower”.
Derrida Derider,
I can see that levying higher consumption taxes on goods that have higher income elasticity of demand is more progressive than a flat tax on consumption. (For the non-economist, this basically means that luxury taxes are more progressive than a flat GST on everything).
But I don’t agree that the regressive nature of commodity taxation is necessarily a problem that has to be addressed therough the tax system. The best option would be for a flat tax on commodities (and perhaps a higher tax on some addictive commodities with ’sin’ properties) coupled with a means-tested transfer payment to ensure that everybody could afford the necessities of life, even after the tax rate(including some low-level luxuries).
The design of the tax system shouldn’t be premised on equality objectives, they are far more efficiently accomlished through transfer payments from government.
I understand that price and availability are the two largest factors affecting harmful alcohol consumption. Therefore, increasing price or restricting availability would reduce harms. A difference between alcohol and tobacco is that users make increasingly impaired decisions about alcohol the more they consume (ie, on a binge). I presume this is not the case for tobacco. Here’s a report: [link]
From the paper:
“In terms of choosing a best practice set of regulatory interventions to reduce alcohol related harms it would be naïve to suggest that restrictions on the availability of alcohol have little or no place in the best practice regulatory toolkit. On the contrary, the research evidence (Commonwealth of Australia 2004, pp.188-192) indicates that physical restrictions on availability rank only after prices/taxes as effective instruments.”
FDB @ 20 on innocent bystanders.
Passive smoking causes social harm, but alcohol too can harm the bystander, e.g. family members or friends assaulted; family members “going without” basics because Dad or Mum have drunk the wages or drunk the pension; strangers killed or injured by drunk drivers; etc.
This morning someone told me that a local cop said that at 3am (?), when the pension payment goes into people’s bank accounts, there are some pensioners on the street trying the ATM so they won’t waste a minute before buying their next grog. Sad but apparently true. Apparently ethanol can be addictive….
Yes Ambigulous, I expressed myself badly. What I meant to convey is that the health effects to non-users of alcohol still tend to involve something volitional on the part of the drinker. Sure, they were drunk, but not every drunk person bashes someone. Whereas the effects of passive smoking are much the same whoever is doing the smoking and whenever they do it, regardless of motivation/intention.
Just one of the differences.
I would have thought the health effects to non-users of alcohol would have been higher than cigarettes, given assault, murder, drink-driving injuries and deaths etc, compared to number of cases of passive smoking cancer cases. Are there any stats?
Kymbos - I’d be very surprised if you’re wrong about that. Add to that the comparative youth of a lot of the victims, and the alcohol effects are probably “worse” even if not more expensive in bean-counting terms.
“Is there research that suggests increasing ’sin taxes’ saves lives? If that’s the case, then I guess I all for this form of nanny statism.”
Then you open the Pandora’s box of, “what is a human life worth?”
Some people want to put an infinite value on human life, but that leads to perverse outcomes (like crossing the road should be forbidden, and eating and drinking and pretty much everything else that involves living). Therefore life is not infinite in value. Therefore there is a point where sin taxes outweigh the value of life saved and should be reduced or abolished.
Where is that point? I haven’t the foggiest.
PS This ignores the (perfectly valid) argument that people’s lives are their own and the risk they incur as a result of their actions is their own as well.
FDB @ 29, thanks: I agree.
Kymbos @ 30, you’d imagine someone must have done this for Australia?
cheerio
“This ignores the (perfectly valid) argument that people’s lives are their own and the risk they incur as a result of their actions is their own as well.”
Which argument itself ignores what to do about unintended consequences to others, be that specific and local (drink-driving, bashing) or aggregate and community-wide (passive smoking).
Syn tax is a real mouthful! Words fail us! Is it a way of smokers and drinkers paying for their inflated health care? The risk isn’t just their own. We all pay the price.