Tax Analysts Blog

If You Hate or Love Excise Taxes Read this New Report

Posted on Feb 13, 2013

Napoleon Complexed politicians like Michael Bloomberg live to tell people how to live. They are almost always motivated by naked aggression. When challenged, these leaders fall back on old standbys. Their favorite argument is that there are societal costs associated with some behavior and such behavior must be controlled through regulation and taxation. The classic example is cigarettes. The people compelled to tell you how to live will say that cigarette smoking is bad. Smokers will get sick and society will have to pay through Medicaid or Medicare. That thinking is used to justify oppressive taxation and prohibiting consenting adults from lighting up almost anywhere.

A new working paper recently released by the Mercatus Center at George Mason University shows the fallacies of such thinking. In a nutshell, the report finds that contrary to conventional wisdom, sin taxes are often not used to correct externalities but rather for general fund spending. My take on that is politicians don’t really care about externalities. They would like to raise money from people whose activities they despise. The report also found that the goal of “sin taxes” has changed from correcting market failures to protecting consumers from their own choices. That is, people are too stupid to run their own lives and they need help. Finally, the report finds that sin taxes are regressive, i.e., they punish the poor. Unfortunately, my liberal friends never get exercised over this issue. Maybe it’s as the great PJ O’Rourke surmised, liberals hate poor people.

There is a lot of other good stuff in the report like the fact that sin taxes lead to excessive lobbying and manipulation by various industries all of which is a big fat waste of energy and resources. In any event, read it, you just might find yourself questioning the tenets of the nanny state once in a while.

Read Comments (1)

von gneisenauFeb 21, 2013

"sin taxes are often not used to correct externalities but rather for general
fund spending. My take on that is politicians don’t really care about
externalities."

"Maybe it’s as the great PJ O’Rourke surmised, liberals hate poor people."

No, way! Say it ain't so! Surely, when liberals use terms such as "white
trash" they only mean the nicest things! No, the problem is not with the
liberals - it is with those backward [West Virginians] who refuse to see the
light!

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