May 02, 2002
Sin Taxes

This article in Reason magazine led Stephen Green, over at VodkaPundit, to start this thread about the folly of sin taxes.

Nobody, however, has touched upon the most pernicious consequence of such taxes: entrenched bureaucracies that will do anything to protect their little piece of the pie.

A case in point is the tax passed here, in the People's Republic of California, a few years ago, Proposition 99.

Proposition 99 passed in November 1988 by a 58 to 42 percent margin, increasing the state's cigarette tax from 10 to 35 cents (per pack). A new 42 percent tax was also imposed on non-cigarette tobacco items. Six accounts were created to disburse the funds:

Anti-tobacco education in schools and communities (20 percent);
Hospital treatment of indigent patients (35 percent);
Physician treatment of indigent patients (10 percent);
Research on tobacco-related diseases (5 percent);
"Environmental concerns" (5 percent);
Not allocated, to be applied to the above categories (25 percent).

The problem is the new regulatory authority that was installed to implement the decision. Their salaries and administrative budget have to be added up each year, and are probably fairly substantial (I do not have any idea where to find such numbers, or if they are available).

Assume for a moment that this tax accomplishes its task, to significantly reduce smoking. Are you under the illusion that if smoking were cut even 95%, that this new bureaucracy would fold up its tents and move on? That is not the way government functions! The income that they receive will decrease by an equivalent 95%, yet the same fixed overhead costs (which actually increase every year, since nobody in Sacramento is familiar with the term "Zero-Based Budgeting") will still be there. Therefore, this eternal bureaucracy will eventually become a burden on the budget, as expenses exceed income. I need not explain the resultant uproar.

That is why I object to sin taxes; not because of the impact on individuals (I don't smoke, and I drink very infrequently), but because of the impact on government.

posted on May 02, 2002 04:23 PM


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