Should the Wages of Sin Be Taxed?

Economics & Law — By on October 25, 2005 at 1:32 am

As the only two certainties in life, we shouldn’t be surprised to find that both death and taxes share a mutual connection: Sin. While death usually make for more interesting reading, Fr. Robert Sirico, president and co-founder of the The Acton Institute for the Study of Religion and Liberty, has an instructive article in which he examines the economic and moral considerations of



  • http://www.pseudopolymath.com Mark Olson

    It seems to me that the government regulation is the reason we might need such a tax in the first place. If insurance industry was allowed to charge smokers a rate based on the true actuarial calculation of the cost, then the government wouldn’t need to collect taxes to support shortfall. The smoker, in order to get health insurance would be forced to pay a higher rate based on the increased risk of his behaviour. The only reason that the insurance company cannot do this is regulation.
    This could be done in a negative fashion, that is to say, instead of “allowing” the insurance companies access into a smokers private life to find out how much risk he entails, they could offer in exchange for a loss of privacy to the non-smoker or non-drinker access to a lower risk actuarial pool by proving that they don’t engage in said risky behaviour. If you don’t allow such access fair is fair, but you will be assumed to be in the higher risk pool.

  • Eric E.

    The tax issue would be equitable only if the funds collected from said tax, were placed in an escrow type account. In our present system, tobacco settlement funds are allocated to the leading parties political pork projects. No special cause/use taxes should be levied unless the advertised benefit to the public is secured.

  • http://bevets.com/grapevine.htm bevets

    From a purely economic standpoint, though, sin taxes make more sense. This form of taxation could be an effective means of reimbursing the state for the cost incurred by participating in negative behaviors.
    I believe it was William F Buckley who observed that smokers have a habit of dying much sooner than non smokers thereby relieving the state of years and years of medicare and social security payments.

  • Nick

    I believe it was William F Buckley who observed that smokers have a habit of dying much sooner than non smokers thereby relieving the state of years and years of medicare and social security payments.
    But smokers are also generally less healthy while alive and have higher rates of respiratory and cardiovascular disease. It would not surprise me if they also have higher rates of long-term disability. So, while they may die younger, they are also likely to require more medical care while alive. It would be interesting to know how that equation works out.
    I suspect that if insurance companies were able to charge for the full fincancial impact of smoking, a lot of smokers would simply be priced out of insurance. Then, the government would end up footing the bill for the greatly increased number of uninsured people. The govt would probably end up paying for a all of their medical problems, not just the smoking-related damage, because I doubt that our society would be willing to allow, an accident victim to bleed to death simply because he/she is an unisured smoker.
    By financing the increased cost of caring for smokers with a tobacco tax, the state actually hits the smokers in the pocket book. That, I think, stands a better chance of getting their attention than increased insurance rates. Loss of health insurance is a more abstract risk for most people, many of whom act as though they are immortal, anyway. Of course, that assumes that a tobacco tax would actually be used for healthcare, not pork barrel projects, as others have pointed out.

  • http://TheEverWiseBoonton.blogspot.com Boonton

    By using the triangular method, however, the state extends the burden of taxation to include not only the individual but the producer and distributer of the good or service as well. Three parties are affected in the forced transaction: the producer, distributor, the consumer, and the receiver of revenue. Almost all forms of sin tax in the US take this form.
    There is an important topic called the incidence of taxation. Just because the tax lands on the producers foot doesn’t mean that he really pays it. For example, just about everywhere sales taxes are added onto the price of retail goods. While legally the store pays the sales tax it really is the consumer since the store just marks up its prices . Likewise a ‘binary’ sin tax on the individual may end up getting paid by the producer if the producer has to lower his prices enough to make up for the cost of the tax imposed on the consumer. Who pays the tax is a function of bargaining power.
    Insurance companies already use actuarial statistics to determine the premiums paid by smokers, so there should be no reason why a similar method could not be used to determine the taxes. The state could calculate the total cost of the activity (i.e., Medicare payments, loss of income tax from early death, etc.) divide it by the quantity of the product consumed (i.e., packs per day smoked) and amortize it over the life expectancy of the average smoker. The resulting amount would be added to the price of each pack as the equitable tax on the product. The money could then be set aside in a special fund which would be used to reimburse the state for incurring these expenses.

  • http://johncoleman.typepad.com John

    Joe,
    That these taxes are referred to as “sin taxes” highlights the fact that you cannot separate the “pastoral” impact of these taxes from the economic ones.
    The economic and moral problem of a welfare state is that people are not held accountable for their actions. Agreed. We should all foot the bill for our own expenses (in general) and for those charities we select. Instead, the government taxes all citizens for some of these activities (medicare, sugar cane subsidies in Florida)diffusing responsibility. A sin tax, by its very nature, identifies an “immoral” activity and holds those individuals selectively accountable for the costs they incur, essentially descriminating against them in the general system. This descrimination becomes even more exaggerated when you look at some of your recommendations (taxing them for lost income tax due to early death? Come on Joe–as a bioethicist you should realize where this logic will lead in the age of biotecnological enhancement and you should be appalled).
    To be ultimately equitable in the system you describe, the government would have to identify the “perfect life” (no carbs, no preservatives, no strenuous physical activity) and tax people based on simple deviations from that model. Instead, they arbitrarily find activities that are socially unpopular (smoking, gun ownership) and assuming the role of the pastoral state tell those people that their lifestyle choices exclude them from the supposed egalitarianism of the current structure.
    Your argument rests on the assumption that sin taxes are merely economic in their impact and these impacts can be separated from their “pastoral” implications. Do you really think thats true (btw, I am wholly hoping you address the “lost income tax argument” in a way that Christians who may someday refuse their childrens’ genetic enhancement at the cost of prolongated life can feel comfortable with)? Also, it seems to suppose that the primary right to a person’s income rests with the government, and not with the individual–this, to me, is an affront to the Constitution and the Declaration (not to mention 300 years of Lockean rights theory).

  • http://TheEverWiseBoonton.blogspot.com Boonton

    By using the triangular method, however, the state extends the burden of taxation to include not only the individual but the producer and distributer of the good or service as well. Three parties are affected in the forced transaction: the producer, distributor, the consumer, and the receiver of revenue. Almost all forms of sin tax in the US take this form.
    There is an important topic called the incidence of taxation. Just because the tax lands on the producers foot doesn’t mean that he really pays it. For example, just about everywhere sales taxes are added onto the price of retail goods. While legally the store pays the sales tax it really is the consumer since the store just marks up its prices . Likewise a ‘binary’ sin tax on the individual may end up getting paid by the producer if the producer has to lower his prices enough to make up for the cost of the tax imposed on the consumer. Who pays the tax is a function of bargaining power.
    Insurance companies already use actuarial statistics to determine the premiums paid by smokers, so there should be no reason why a similar method could not be used to determine the taxes. The state could calculate the total cost of the activity (i.e., Medicare payments, loss of income tax from early death, etc.) divide it by the quantity of the product consumed (i.e., packs per day smoked) and amortize it over the life expectancy of the average smoker. The resulting amount would be added to the price of each pack as the equitable tax on the product. The money could then be set aside in a special fund which would be used to reimburse the state for incurring these expenses.

  • http://johncoleman.typepad.com John

    Joe,
    That these taxes are referred to as “sin taxes” highlights the fact that you cannot separate the “pastoral” impact of these taxes from the economic ones.
    The economic and moral problem of a welfare state is that people are not held accountable for their actions. Agreed. We should all foot the bill for our own expenses (in general) and for those charities we select. Instead, the government taxes all citizens for some of these activities (medicare, sugar cane subsidies in Florida)diffusing responsibility. A sin tax, by its very nature, identifies an “immoral” activity and holds those individuals selectively accountable for the costs they incur, essentially descriminating against them in the general system. This descrimination becomes even more exaggerated when you look at some of your recommendations (taxing them for lost income tax due to early death? Come on Joe–as a bioethicist you should realize where this logic will lead in the age of biotecnological enhancement and you should be appalled).
    To be ultimately equitable in the system you describe, the government would have to identify the “perfect life” (no carbs, no preservatives, no strenuous physical activity) and tax people based on simple deviations from that model. Instead, they arbitrarily find activities that are socially unpopular (smoking, gun ownership) and assuming the role of the pastoral state tell those people that their lifestyle choices exclude them from the supposed egalitarianism of the current structure.
    Your argument rests on the assumption that sin taxes are merely economic in their impact and these impacts can be separated from their “pastoral” implications. Do you really think thats true (btw, I am wholly hoping you address the “lost income tax argument” in a way that Christians who may someday refuse their childrens’ genetic enhancement at the cost of prolongated life can feel comfortable with)? Also, it seems to suppose that the primary right to a person’s income rests with the government, and not with the individual–this, to me, is an affront to the Constitution and the Declaration (not to mention 300 years of Lockean rights theory).

  • http://johncoleman.typepad.com John

    Joe,
    That these taxes are referred to as “sin taxes” highlights the fact that you cannot separate the “pastoral” impact of these taxes from the economic ones.
    The economic and moral problem of a welfare state is that people are not held accountable for their actions. Agreed. We should all foot the bill for our own expenses (in general) and for those charities we select. Instead, the government taxes all citizens for some of these activities (medicare, sugar cane subsidies in Florida)diffusing responsibility. A sin tax, by its very nature, identifies an “immoral” activity and holds those individuals selectively accountable for the costs they incur, essentially descriminating against them in the general system. This descrimination becomes even more exaggerated when you look at some of your recommendations (taxing them for lost income tax due to early death? Come on Joe–as a bioethicist you should realize where this logic will lead in the age of biotecnological enhancement and you should be appalled).
    To be ultimately equitable in the system you describe, the government would have to identify the “perfect life” (no carbs, no preservatives, no strenuous physical activity) and tax people based on simple deviations from that model. Instead, they arbitrarily find activities that are socially unpopular (smoking, gun ownership) and assuming the role of the pastoral state tell those people that their lifestyle choices exclude them from the supposed egalitarianism of the current structure.
    Your argument rests on the assumption that sin taxes are merely economic in their impact and these impacts can be separated from their “pastoral” implications. Do you really think thats true (btw, I am wholly hoping you address the “lost income tax argument” in a way that Christians who may someday refuse their childrens’ genetic enhancement at the cost of prolongated life can feel comfortable with)? Also, it seems to suppose that the primary right to a person’s income rests with the government, and not with the individual–this, to me, is an affront to the Constitution and the Declaration (not to mention 300 years of Lockean rights theory).

  • http://johncoleman.typepad.com John

    Joe,
    That these taxes are referred to as “sin taxes” highlights the fact that you cannot separate the “pastoral” impact of these taxes from the economic ones.
    The economic and moral problem of a welfare state is that people are not held accountable for their actions. Agreed. We should all foot the bill for our own expenses (in general) and for those charities we select. Instead, the government taxes all citizens for some of these activities (medicare, sugar cane subsidies in Florida)diffusing responsibility. A sin tax, by its very nature, identifies an “immoral” activity and holds those individuals selectively accountable for the costs they incur, essentially descriminating against them in the general system. This descrimination becomes even more exaggerated when you look at some of your recommendations (taxing them for lost income tax due to early death? Come on Joe–as a bioethicist you should realize where this logic will lead in the age of biotecnological enhancement and you should be appalled).
    To be ultimately equitable in the system you describe, the government would have to identify the “perfect life” (no carbs, no preservatives, no strenuous physical activity) and tax people based on simple deviations from that model. Instead, they arbitrarily find activities that are socially unpopular (smoking, gun ownership) and assuming the role of the pastoral state tell those people that their lifestyle choices exclude them from the supposed egalitarianism of the current structure.
    Your argument rests on the assumption that sin taxes are merely economic in their impact and these impacts can be separated from their “pastoral” implications. Do you really think thats true (btw, I am wholly hoping you address the “lost income tax argument” in a way that Christians who may someday refuse their childrens’ genetic enhancement at the cost of prolongated life can feel comfortable with)? Also, it seems to suppose that the primary right to a person’s income rests with the government, and not with the individual–this, to me, is an affront to the Constitution and the Declaration (not to mention 300 years of Lockean rights theory).

  • http://TheEverWiseBoonton.blogspot.com Boonton

    By using the triangular method, however, the state extends the burden of taxation to include not only the individual but the producer and distributer of the good or service as well. Three parties are affected in the forced transaction: the producer, distributor, the consumer, and the receiver of revenue. Almost all forms of sin tax in the US take this form.
    There is an important topic called the incidence of taxation. Just because the tax lands on the producers foot doesn’t mean that he really pays it. For example, just about everywhere sales taxes are added onto the price of retail goods. While legally the store pays the sales tax it really is the consumer since the store just marks up its prices . Likewise a ‘binary’ sin tax on the individual may end up getting paid by the producer if the producer has to lower his prices enough to make up for the cost of the tax imposed on the consumer. Who pays the tax is a function of bargaining power.
    Insurance companies already use actuarial statistics to determine the premiums paid by smokers, so there should be no reason why a similar method could not be used to determine the taxes. The state could calculate the total cost of the activity (i.e., Medicare payments, loss of income tax from early death, etc.) divide it by the quantity of the product consumed (i.e., packs per day smoked) and amortize it over the life expectancy of the average smoker. The resulting amount would be added to the price of each pack as the equitable tax on the product. The money could then be set aside in a special fund which would be used to reimburse the state for incurring these expenses.

  • http://jimgilbertatlarge.blogspot.com/ Jim Gilbert

    Nick, you’re right that “smokers are also generally less healthy while alive and have higher rates of respiratory and cardiovascular disease.” I believe that’s due in part to the fact that smokers more frequently engage in other “vices,” such as harder drinking.
    Joe, I’m a fan of user taxes too (as opposed to general taxes), but only if, as you suggest, the funds derived are used in the same area, e.g., turnpike improvements. If only public schools were treated the same way.
    The overall tone of resignation in your article is interesting. God warned Israel that a king (eventually Saul) would be a tyrant, with a ten percent tax rate as a mark of tyranny. Yet we’re so used to the unjust confiscation of our monies that it takes to support a state way too top-heavy, that we would consider a ten percent tax not tyranny, but relief.

  • acha

    Joe,
    THIS IS ABSOLUTELY ABSURD!!!
    Are you planning on running for office??
    People of this country should demand the cessation of taxes not recommend or approve of new ways to bleed us dry. Let us tax our so-called representitives for their lack of integrity and immorality! Don’t you know that my/your/our tax dollars help fund the health industry so that it may care for those non-citizens so that they can be healthy enough to work the fields and low paying jobs for the rich? This sin tax is simply a smoke screen (no pun intended).

  • Nick

    Jim,
    I believe that’s due in part to the fact that smokers more frequently engage in other “vices,” such as harder drinking.
    I think you are probably correct — that’s part of the problem. But smoking itself also affects chronic health problems, not just lethal lung cancer.
    Here in the southeast, we seem to have the odd situation of people who smoke (probably due to the historic importance of tobacco cultivation) but don’t drink (due to being in the bible belt). Thus, they get the harmful effects of tobacco but miss out on the potentially beneficial effects of moderate alcohol intake. It’s a double whammy for their cardiovascular system, and traditional high-salt high-fat southern cuisine doesn’t help.

  • http://mumonno.blogspot.com Mumon

    Consider this a more general, kinder, gentler, and mercifully shorter version of what DarkSyde responded earlier, albeit my reasons have little to do with Hurricanes and Kos:
    Gee, you and Hugh Hewitt have become mighty irrelevant lately.
    Hope you get your bearings back soon.

  • http://www.centeredwork.com AndyS

    our own taxes on cigarettes (which, at about 56 cents per pack, are among the lowest in the world)

    This is misleading. Our federal tax is about 56 cents per pack, but every state adds its own tax to that, from 3 cents in Kentucky to $2.46 in Rhode Island. Michigan and New Jersey tax cigarettes at or above $2.00. In 14 states the tax is between $1 and $2. (Data as of 1/1/2005)

    But since we have to have taxes there is no reason to include activities that have harmful or negative social effects.

    I assume that’s a typo and you meant “no reason not to include”.

    From a moral point of view, sin taxes are an illegitimate means of controlling the behavior of the citizenry. We should not rely on the state to use its tax code to intervene in an area that is the responsibility of the church and community.

    This translates to “the church and community responsible for controlling the behavior of the citizenry.” I have a problem with associating church with control.

    The use of tobacco as an example is tiresome. How about alcohol, cars, and firearms? How about products and manufacturing processes that harm the environment or introduce cancer-causing agents into the environment? Where and how do you draw the line?

  • http://TheEverWiseBoonton.blogspot.com Boonton

    Insurance companies already use actuarial statistics to determine the premiums paid by smokers, so there should be no reason why a similar method could not be used to determine the taxes. The state could calculate the total cost of the activity (i.e., Medicare payments, loss of income tax from early death, etc.) divide it by the quantity of the product consumed (i.e., packs per day smoked) and amortize it over the life expectancy of the average smoker. The resulting amount would be added to the price of each pack as the equitable tax on the product. The money could then be set aside in a special fund which would be used to reimburse the state for incurring these expenses.

  • http://www.leanleft.com tgirsch

    Three parties are affected in the forced transaction: the producer, distributor, the consumer, and the receiver of revenue.

    Umm, doesn’t that make four parties?

  • http://made4theinternet.blogspot.com/ Steven J. Kelso Sr.

    Since medicaid, medicare and socialist security are all unconstitutional, it is none of your business what I inhale/eat/drink. I did not ask you to take money from my paycheck, don’t even think about asking me to pay more.
    Now that we’re talking sin tax, let’s look at a few other sins that we can tax:
    Gay Sex — use money to pay for AIDS treatment, relieving medicare
    abortion — money used to try and stop ugly women from getting pregnant in the first place (have you noticed how ugly abortion supporters are?)
    fatness — use money to rescue the occasional 300+ person that the paramedics must take to the hospital on occasion
    democrats — no wonder the dems fight against the 10 commandment displays (if people didn’t covet their neighbor’s money and allowed people to create “sin” taxes, they’d never get elected again!)

  • Larry Lord

    abortion — money used to try and stop ugly women from getting pregnant in the first place (have you noticed how ugly abortion supporters are?)
    Still cuter than your average fetus.
    Speaking of ugly, check out Delay’s plastic surgery disaster here:
    http://www.awfulplasticsurgery.com/

  • George

    Hey Larry, where’d you write your dissertation?

  • Larry Lord

    Hey Larry, where’d you write your dissertation?
    In California, surrounded by gay people.

  • George

    Now Larry, you know I want to read your graduate magnum opus in Dissertation Abstracts. You aren’t ashamed of it, are you?

  • George

    Dr. Larry Lord
    I googled up your domain at magazine.com. Interesting. Which accredited institution granted your PhD and will have a copy of your dissertation available in Dissertation Abstracts? I’m really interested in browsing through it.

  • Larry Lord

    George
    I’m really interested in browsing through it.
    Just browse through http://www.pubmed.org. Everything in my thesis was published in Science, Cell or the Journal of Biological Chemistry. Oh, and a review I wrote with my P.I. ended up as a chapter in a book on nucleic acid structure and function.
    Seriously, though: you crack me up. What in the world makes you think I’m lying about my Ph.D.? I suppose you’ll want “proof” of my law degree, next. And then you’ll want to see my cross-country medals from high school.
    Get a grip, man.
    sigh

  • http://truegrit.weblogs.us/ ilona

    Are many sin taxes really that? Or luxury taxes? I think we just call them sin tax by force of habit, rather than on clear moral ground.
    I think there is a problem with dealing with moral issues or even pragmatic social issues on a solely montetary basis like this. It is tempting for society, but the “fairness” of life isn’t there to make it equitable. Just the discussion on smoking and its consequences ( or shortened ones) illustrates this.
    Ultimately dealing with social problems in a punitive way has its limits…Christians, of all people, ought to know this. There is also the problem of unfairly weighting certain obvious “sin” behaviors with penalties that the “virtuous” though equally sinful in some untaxed way somehow have exemption from. Are you going to make a gluttony tax? No.
    So well it sounds all nice and satisfactory to say we are simply calling for just recompence of sin- it is anything but that. It is simply the old sumptuary laws dressed up in new clothes.
    Someone just wants to make money for something else and do a little social kick in the shins at the same time.

  • George

    Seriously… What in the world makes you think I’m lying about my Ph.D.?
    Interesting trope for a scientist, Larry. I never said anything about lying. Is there something about your dissertation you don’t like? Is there a law against being curious?
    Besides, getting your name listed on a paper or a chapter means nothing. I’ve listed lab assistants that were undergraduates who happened to do very good work. It’s a boost to them when they apply to grad school, if they do. If I were skeptical about your credentials, that kind of stuff would most definitely not suffice. Surely you know that.
    Don’t be so paranoid. I’ll go first:
    G.J. Boggs, Purdue University, 1981.
    See? The sky didn’t fall and Bill Bennett is not President-for-Life…

  • http://www.acton.org/blog/index.html?/archives/531-Taxing-the-Wages-of-Sin.html Acton Institute PowerBlog

    Taxing the Wages of Sin

    A lively discussion is going on over at the evangelical outpost on the idea of the “sin tax,” spurred on by Rev. Sirico’s paper on that subject.
    A key point to remember: once the state gets to decide which activities are immoral (but

  • Larry Lord

    Who’s next? Alphabetical order, right? Let’s see … that would be Boonton, I guess.

  • Larry Lord

    Wow, knee-jerk conservative shills are some of the strangest people on earth.
    Check out Michelle Malkin’s blog re the “manipulation” of a photo of Condi Rice
    http://michellemalkin.com/archives/003780.htm
    So, I learned today that demons have really white eyeballs. Thanks Michelle. Oh, and thanks to Assrocket, too, who felt it necessary to jump and down and celebrate USA Today’s “acknowledgement” that the photo was “manipulated” (as if photographic prints are normally hand-pasted directly onto newspapers and computer screens).
    Guess what folks? Lyin’ Condi Rice ALWAYS looks a bit like Chuckie’s black twin, which is to say that she vaguely resembles some drawings people have made of the devil and/or his cohorts.
    The question is: why pretend otherwise?
    The answer is: knee-jerk conservatives are really weird when it comes to their idols.
    I’m still waiting for USA Today to apologize for making Jon Gruden look like Jack Nicholson in the Shining. Maybe I should send an email to Michelle Malkin.

  • http://blogotional.blogspot.com/2005/10/sin-tax-why-nevada-likes-gaming-and.html Blogotional

    Sin Tax — Why Nevada Likes Gaming And Prostitutio

    Besides, in my opinion its not really a sin tax — it’s an inelastic demand tax.

  • http://www.josephlied.com/ idiot

    i am an idiot and i am lead by richard simmons