Whenever government seeks new revenues, so-called "sin taxes" are among the first proposals to be floated. The reason is simple: these taxes are really about getting the most feathers for the least squawk.
The people who are to be taxed are easy targets. They engage in activities which are deemed immoral or unhealthy. They usually are less well-organized than those who might benefit from the spending fueled by the new taxes. They are often outnumbered by the people who do not engage in the same activities and, hence, will not be directly harmed by the taxes.
Let's take cigarette smoking as an example. It's an especially timely one because higher taxes on cigarettes are favored by the Clinton administration. Here in Michigan, Governor Engler proposes to raise the 25-cent per pack state tax to 75-cents as part of his education finance package unveiled last month.
A tax on cigarettes is clearly a case where the majority can tax an identifiable minority, since at least two-thirds of Americans do not smoke. Nonsmokers know that they'll pay more if either the income or sales tax goes up, but that they'll pay exactly nothing if the cigarette tax is doubled or tripled. The massive campaign against cigarette smoking--a good deal of it government-funded--has left millions of Americans with the feeling that such behavior ought to be punished. Even some smokers themselves might favor higher cigarette taxes if they think they need government's help to kick the habit.
So what possible arguments could anyone advance against higher taxes on something that so many people find objectionable? Here are several to consider:
Cigarette taxes are regressive. Families in the bottom 20 percent of income earners spend 4 percent of their after-tax income on tobacco, compared to 1/2 of 1 percent by families in the top 20 percent bracket. The late Professor Harvey Brazer of the University of Michigan put it this way: "From the standpoint of equity, few existing taxes can be held to be more reprehensible than the cigarette tax. . . .Tax-bearing cigarette smokers typically do not smoke less when rates go up; they and their families consume less of other things."
As a group, smokers pay the full costs of their habit. Researchers reported in the March 1989 Journal of the American Medical Association that the costs smokers "impose" on society (from higher insurance and other health-related expenses to covered sick leave for workdays lost by smokers to property lost from fires associated with smoking) are "considerably lower than the average combined federal and state tax" on cigarettes. The Congressional Budget Office concluded in June 1990 that "the external costs of smoking are already covered by existing taxes."
Vices are not crimes. Government exists to protect each individual's life, liberty and property from attack by other individuals. It does not exist to protect each person from himself. Once a majority is conceded the right to impose its way of life upon a minority--no matter how "good" the intentions--there is no logical argument to prevent the majority from regulating and restricting down to the smallest detail. Perhaps that's a principle Henry David Thoreau had in mind when he wrote, "If I knew for certain that a man was coming to my house to do me good, I would run for my life."
To those who believe that state government already taxes and spends too much, raising the cigarette tax on top of existing taxes would be especially unpalatable. Because the proposed tripling of Michigan's cigarette tax is meant to partially offset the recent huge property tax cut, it might be easier to swallow but the above concerns are just as valid.
In any event, sin taxes are not a good substitute for education and persuasion. You don't make a person "religious" by forcing him to church at gunpoint. Talk him into going voluntarily, however, and you may have a convert for life.
Higher cigarette taxes, in terms of both our liberties and our pocketbooks, may be hazardous to our health. Whatever the outcome of the Governor's cigarette tax proposal, legislators ought to consider that there are, indeed, two sides to the issue.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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