2006-12-18

Question: Why can't so-called "sin taxes" be used as sources of general revenue?

Question from Anonymous:
Regarding price linking: would it not be fair to impose a tax simply as a disincentive, in cases of cigarette or poker machine taxes? Red light camera fines are a form of punishment, not taxes. Polution-related taxes such as petrol taxes are fair, but what kind of clean-up activity could the government perform when it comes to air polution?Why can't so-called "sin taxes" be used as sources of general revenue? Is it not better to tax the bad activities than the good ones, such as income earned?

Answer from Stewart:
Hello again Anon.
Moral vs Legal :
When you start to use punishment are a disincentive for things that might be bad for you, but not necessarily hurting anyone else, you start to mix the Moral and the Legal or unseparating "the church and state". The state is trying to make you do good. It is a very dangerous game. If freedom doesn't mean the right to make bad decisions for yourself what does it mean?


If you smoke, and it is not around others, what has that to do with the government?

Air Pollution Tax
A tax on air pollution is really only an intermediate solution. In reality, pollutants should not be allowed. However, we have got ourselves in a bit of a hole and need to climb out of it. A tax on pollutants is a good way for 2 reasons. One, it creates a cost disincentive. Secondly, the money generated is used specifically toward a solution (ie non-polluting technology).

Sin Taxes
Isn't the idea of society to have it full of good people? The problem with sin* taxes is that the government has a vested interest in the people continuing to do wrong things. General revenue is a bucket with holes in it - it will always spend what goes into it.

Punishment should be primarily about reparation. What do you do if the "sins" drop 50%? Are the fines doubled to keep the revenue? Justice should be even handed, not too much and not too little, and make the punishment fit the crime.

* I use sin here to mean victim-less crimes, ie where the only one hurt is a capable adult making the decision.

4 comments:

Anonymous said...

The way I think about it is that government must gather taxes to fund their expenditure, and those taxes can come either from 'goods' (income, saving) or from 'bads' (petrol, cigarrettes, pokies). You've highlighted some problems with taxing 'bads', but I'd argue that we're still much better off taxing 'bads' than 'goods'. Far better to discourage smoking than to discourage earning income. The more you reduce taxes on 'bads' the more we have to increase taxes on 'goods'.

Stewart said...

Of course, governments need income to function. How it collects the taxes is very important, though.

When a government starts making moral judgement on individuals whose actions do not hurt others, you are getting into dangerous ground. It is the nose of the camel. Part of the problem: who decides what is good and bad? Do you really want the goverment to make those decisions in your life? Smoking is obviously detrimental to health, but so it junk food, not exercising. Do we want these taxed too? Remember also the more complicated you make the law, the more bureaucracy we get.

I must admit, that if I had to choose, I would prefer a tax on spending (like GST is) to a tax on income, but my first preference would be to see true equality before the law.

Anonymous said...

The justification for sin taxes is that the sins DO hurt others, usually in the form of govt expenditure to deal with the fall-out. Think gambling programs, lung cancer treatments etc.

What's unambiguously clear is that earning income and saving are good things. So taxing something that is not as unambiguously good is going to be a good thing. So whether it's smoking, eating junk food, or anything else not entirely good, it's got to be an improvment on taxing income.

Stewart said...

Even as I believe people must be free to make thier own choices, so they must be free to take the consequences. (Key 06-C+R: Choice and Responsibility)

Welfare or mercy programs like gambling programs or lung cancer treatments should not be paid for by the people as a whole (ie via the government). The people do not decide whether you gamble or smoke in the first instance. But if these areas are taxed, it should not go to the government but only to programs directly related. ie Gambling revenue only to fix gambling problems. This is what "price linking" is all about.

On the second point, I don't think something like earning income is unambiguously good. What about some people who spend all thier time earning with out social responsibility, ie whose kids are degleted in pursuit of a career.

These are both issues that should be chosen on an individual basis, unfettered by the government.

The government has no place in legislating morally - only in protecting citizens from others and co-ordinating communal areas.