LCSN: Do sin taxes work? And if so, should we allow them?

April 11, 2011. Retrieved online April 11, 2011 from Brook Stockberger, Las Cruces Sun-News

LAS CRUCES – If you want a Diet Coke or a Big Mac, should you have to pay more because some pantywaist with a clipboard and an agenda wants you to, because such items are “bad” for you?

Last week Gov. Martinez vetoed a bill that would have taxed certain cigarette manufacturers who currently receive exemptions. She did not say whether she has a moral gripe against such taxes, but she said she didn’t want to raise any taxes.

Sin taxes, as they are called, are those placed on products that are deemed unwanted by “society.” For instance, soft drinks might be considered to have no nutritional value and many are full of sugar, and thus can contribute to the obesity problem and the rise in health care expense for diseases like Type 2 diabetes.

So why not tax such items, drive down consumption and put a little jingle in the government’s coffers at the same time?

I’ll tell you why: Social engineering through punitive actions is not the government’s job.

Where is the line, and who draws it?

Protecting public health is one thing, but for a government entity to tax an item based on the concept that they don’t think it’s good for you makes for the clichéd slippery slope. Where are we going to draw the line? What if someone decides that white rice should be heavily taxed because it is full of carbs? During my own battle/struggle with morbid obesity, I’ve been told by a medical professional that I should consider white rice “the devil.”

What about Mexican food? There are a lot of carbohydrates in some of those dishes and, as we know, too many carbohydrates are bad juju for diabetics.

“Interestingly, most items traditionally subject to sin tax – alcohol, cigarettes and so forth – are relatively insensitive to taxation, so are good things to tax if the goal is to raise revenue,” said Chris Erickson, a professor of economics at New Mexico State University.

“Of course (that) puts aside the issue of whether the government should be in the business of using taxes to shape people’s behavior,” Erickson said. “Value judgments about what people should eat, drink and smoke might be best left to the individual rather than to the state.”

Do sin taxes work?

Richard Adkisson, head of the Department of Economics and International Business at NMSU, said that whether sin taxes work is based on the concept of “elasticity of demand.”

If people still want an item, they will buy it even with an added or raised tax, and the government’s revenue will increase. Like Erickson, he points to cigarettes, alcohol and even gasoline.

“Consumers are not that sensitive to prices,” Adkisson said. “They might complain but, at least in the short run, changes in price doesn’t change their behavior much.”

Tax expert Larry Tunnell, who teaches in the Accounting and Information Systems Department at NMSU, said that sin taxes can work, but they do not affect society equally.

“Most sin taxes are, unfortunately, regressive, meaning that those at lower income levels pay more than their share – as a percent of income – of the sin taxes,” Tunnell said. “This is certainly true for tobacco, alcohol and gas taxes.”

Read the Las Cruces Sun-News article.

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