In recent years, Rhode Island's fiscal woes have repeatedly made national news. With a deficit of $427 million for fiscal year 2011 and a projected shortfall of $290 million for fiscal year 2012, legislators are hard pressed to engineer solutions to the budget crisis. Sin taxes — taxes on alcohol, tobacco and other products considered by some to be, well, sinful — are a politically expedient and frequently used tactic to raise revenue.
Indeed, Rhode Island's cigarette taxes are already the second highest in the country, adding $3.46 to each pack. In light of the Ocean State's solidly Democratic nature and the fact that sin taxes are generally favored by liberals, this figure seems set to grow.
Despite their popularity, sin taxes are unjust and economically destructive in the long run. They represent a blatant attempt by government to regulate personal consumption choices based on an arbitrary set of moral and aesthetic preferences. In addition, sin taxes leave store owners vulnerable to competition from black markets, especially near state lines.
Sin tax proponents frequently argue that making unhealthy goods like cigarettes and junk food more expensive will result in a healthier populace. This may be true, but this assertion is based on the erroneous belief that one person's health is the concern of the whole of society.
Rather, personal health is a matter of personal responsibility. Most of the negative externalities that arise from things like smoking and a high-fat diet are already borne by the consumer. Health insurance companies frequently charge higher premiums for smokers and biases against the obese are pervasive in modern American culture.
It is true that some health costs of tobacco use accrue to government-funded health services. However, these expenses can be better managed by paying less in state benefits in cases of smoking-related illnesses. This way, the external costs associated with smoking are paid solely by the ones who incur them.
Furthermore, the ethical basis for imposing sin taxes is rigid, allowing no variability in incentives and motivations between individuals. Because the tax is applied per unit purchased, all smokers and all overeaters are equally guilty in the eyes of the tax code.
To understand why this is a problem, consider Alice. Alice has a terminal genetic disease for which no cure has been discovered. In light of this, she has decided to take up smoking, since it helps her manage the stress of her condition and would be unlikely to alter her life expectancy anyway.
However, Alice, who lives in Manhattan, has encountered difficulty in obtaining her nicotine fix. For every pack of cigarettes that Alice buys in New York City, she pays over $4 to a government that condemns her understandable desire to "sin" as much as possible while she still can.
In Alice's case, the justifications most often used by sin tax supporters fall flat. Her lifespan is unlikely to be affected by her choice to smoke, and because she has no children, no one is forcibly hurt by secondhand smoke when Alice lights up in the privacy of her own home.
The example of Alice is admittedly hyperbolic, but in a way, that's the point. When government policy emphasizes social engineering over personal freedom, the interests of outliers — people radically different from most Americans — tend to get trampled. Drug Enforcement Agency raids on medical marijuana dispensaries exemplify this phenomenon.
Consumers are far from the only ones adversely affected by sin taxes. Such taxation also threatens the bottom line for store owners that sell tobacco and other frowned-upon goods. Because online distributors are exempt from sin taxes, the government effectively eliminates the ability of local stores to compete on the basis of lower prices.
Even before the advent of online grocery shopping, wide sin tax differentials across state lines had a similar effect. For example, Washington state's tax on cigarettes is the fourth highest in the nation, at roughly $3.03 a pack, while neighboring Idaho's tax per pack is a mere 57 cents, one of the lowest in the country.
Such gaps deny shops at the edges of high-tax states a vital source of revenue, but they also generate profits for black market operators by letting them buy from a cheap market and sell into a nearby market where prices are artificially inflated. The state is, in effect, taking money from established shopkeepers and handing it to smugglers.
Given popular misconceptions of smokers as addicts and obese people as gluttons, it's easy for voters to see sin taxes as an effort to protect certain groups from themselves. However, is a thin person who buys a candy bar not taxed equally? Is a first-time smoker not taxed equally?
Sin taxes send the message that citizens — all citizens — are so inept at guarding their own welfare that the government needs to nudge them toward what it deems the right choices, which it is specially equipped to identify. Moreover, every sin tax increase represents food taken from the mouths of shopkeepers who often rely on revenue from tobacco sales. Then again, if the shopkeeper is overweight, sin tax proponents are unlikely to mind.
Hunter Fast '12 thinks that an ideal world would involve a sin tax on Kesha's albums.
