Sin taxes and the politics of meaning: No way to pay
David G. Tuerck
The Clinton administration has expressed
a desire to fund a new health-care plan from increases in "sin
taxes" -- excise taxes on tobacco and alcohol products. The
stated rationale is that the tax hikes would simultaneously raise
revenue to pay for the new plan and reduce health-care costs by
discouraging unhealthy behavior.
Maybe this isn't the only rationale for the
proposed higher taxes, however. That something actually having to
do with religion may be going on here is suggested by an article
in the New York Times Sunday Magazine titled, "Saint
Hillary." The article, which carries a picture likening the
First Lady to Joan of Arc, explores the theological and intellectual
roots of the "communitarian" philosophy that she has been
expounding lately. That philosophy appears to consist of the subordination
of individual values to a greater, communal good -- all based on
something called "the politics of meaning."
For those whose behavior might, according
to this new religion, be deemed sinful, this is no mere philosophical
issue. Mrs. Clinton is in charge of fashioning the new health plan
and would presumably be responsible for the proposed increase in
"sin taxes." In this endeavor, she has the full support
of the president. Her rhetoric blends well with his call for "shared
sacrifice" in the name of deficit reduction.
The vast majority of us who are nonsmokers
or light drinkers should therefore think twice before endorsing
the proposed tax hikes. The fact that we won't be much affected
this time around should be of little comfort, if it turns out that
we are now in the grip of a latter-day Carry Nation who has more
plans for subordinating our individual selves to the greater good.
After all, there is no reason to limit the
politics of self-denial to just alcohol or cigarettes. A "sin-tax"
proposal would raise taxes on just a few of many items whose consumption
someone might wish to discourage and that are believed to represent,
incidentally, a lucrative revenue source. Another proposal receiving
serious attention is that of imposing a value-added tax, which would,
in effect, raise taxes on everything we consume.
It is necessary, in understanding this new
Calvinism, to consider the dubious nature of the Clintonites' claim
to moral authority. "Sacrifice," as Ayn Rand has told
us, is what politicians ask for when they want to take something
away from us -- choices about our personal habits, for example.
To suggest that higher "sin taxes" are needed in order
to reduce health costs is to garb nascent "Big Brotherism"
in the language of pseudo-economics.
Take, for example, the argument made by proponents
of the tax hikes that the "social costs" of cigarettes
are more than $2 per pack, this cost defined to include the supposed
value of lost production and wages and of medical care attributable
to smoking. The trouble with such arguments is that these social
costs are borne by the smoker and are thus of no legitimate concern
Economics distinguishes between two kinds
of social costs that arise from an activity. The first are costs
that are "internal" to the person engaging in that activity--
costs borne by the person engaged in the activity. The second are
costs that are "external" to that person-- costs imposed
on others. When the costs of any activity are fully internalized,
they are no longer a legitimate target of public policy efforts
aimed at reducing them.
I could therefore do any number of things
that might run up my health-care costs and reduce my ability to
produce and earn wages: smoke, drink, skydive, exercise too much
or too little, or eat fatty foods. The purpose of health policy
(or at least a health policy that respects, rather than denigrates
individual values) is not to make choices for me concerning these
activities, but to make sure that I pay the full cost that arises
from my engaging in them. Once that cost becomes entirely my problem,
the choice to incur it or not becomes entirely my business -- not
yours or the Clinton administration's.
Do we really want a philosophy of government
that sanctions any form of individual behavior only insofar as it
passes some communitarian litmus test? Shall we put a special tax
on ice cream on the theory that people who eat it shorten their
productive lives and may not be adequately insured for their health
care? Shall we limit the number of people who study poetry on the
argument that they are at risk of entering a profession that pays
lower wages than, say, hair cutting?
The principal reason that health-care reform
has become a legislative priority, assigned to the first lady rather
than some other national issue, is that our health-care institutions
generally fail to internalize health-care costs and efficiently
and accurately charge consumers for the services they receive. Among
the problems are the absence of price competition among medical
providers, continued willingness by employers to subsidize the use
of fee-for-service over HMO providers, frivolous malpractice suits,
health-insurance fraud, and excess hospital capacity.
that 'politics of meaning' is nothing more than what the First
Lady means by politics.
These, not one form of consumer behavior
or another, are the root causes of the health-care crisis. Raising
"sin taxes" represents, in this context, an attempt to
exploit one group of consumers -- smokers and drinkers -- whose
ability to mount significant resistance is weakened by the political
disadvantage from which, by virtue of their personal habits, they
suffer. Some claim to moral authority!
Smokers are particularly vulnerable because
their numbers are smaller, and, given the temper of our times, their
public relations problems greater. The same President who promised
a tax cut for the middle class thus mobilizes his first lady to
float a tax increase that would fall five times more heavily on
the middle class and fifteen times more heavily on the poor than
on the rich.
Suppose we put on hold our concerns about
interfering with individual choices and follow the first lady's
signal to make the health of smokers a matter of social policy.
The case for higher "sin taxes" is still specious, at
best. When you consider the low price sensitivity of smokers, a
higher excise tax turns out to be more a revenue raiser than a deterrent
Massachusetts recently approved a 25-cent
increase in the state cigarette excise tax. The Massachusetts tax
hike can be expected to cause the pack-a-day smoker to cut back
by only about three-quarters of a cigarette per day. The same tax
hike, which can be expected to raise about $65 million annually,
is supposed to bring about a decrease in the number of young people
who take up smoking. This decrease would be about 845 per year,
at a cost to the taxpayer of over $76,500 per discouraged smoker.
Congress should consider the Massachusetts
example as well as the dubiousness of the Clintons' new theology
before it rushes ahead to raise "sin taxes," should such
a proposal be made. It appears that "politics of meaning"
is nothing more than what the first lady means by politics.
David G. Tuerck is executive director
of the Beacon Hill Institute and chairman and professor of economics
at Suffolk University. This article first appeared in The
Brockton Enterprise on August 22, 1993.
Format revised on 18