The Unrepentant Individual

...just hanging around until Dec 21, 2012

May 24, 2005

Taxes as behavior modification

Much was made when Bush was reelected of his desire to simplify the tax code. I’m not sure where that went, but maybe sometime by 2008 he might give another speech supporting it. And one of the most common rationales for simplifying the tax code is that it is such a maze of unintelligible, frequently contradictory, and counter-productive cut-outs to satisfy one special interest or another. Simplification reduces compliance costs that burden our economy, and reduces economic distortion caused by unproductive uses of money designed to reduce tax burden rather than improve the economy. But that’s only half of it.

It popped to mind with this:

Bar Tabs Going Up As States Tax Alcohol

More and more states are considering higher alcohol taxes after years of raising cigarette rates.

This year, Kentucky and Washington state hiked their liquor tariffs. Montana, Indiana and North Dakota rejected higher beer taxes.

Texas is still considering an increase, which would go to help pay for public schools. And Ohio lawmakers must decide what they’re going to do before the new fiscal year starts July 1.

Yep. The demonization of smokers has been so successful that fewer and fewer people smoke. You’d think that was a good thing, but now fewer and fewer people are paying cigarette taxes, leading to less revenue in government coffers. Likewise, those nasty buyers of hybrid vehicles, with their care for the environment and desire for high fuel efficiency, are forcing lawmakers to consider taxing by the mile to offset the reduction in gasoline taxes. Faced with the success of their policies, now they want to go after alcohol, or I should say, further after alcohol, because it is typically already given its own excise and “sin” taxes.

But is this the right thing to do? Is it legitimate, in the spirit of America’s founding, for the majority to decide that certain activities are “bad” or “good”, and thus should be taxed at higher or different rates than others? Is it legitimate, in a country where we supposedly have “equal protection under the law”, that some people and activities are just more “equal” than others?

I think we can look at some things, and most people will agree that some of these cutouts are a good idea. Like, for example, the mortgage interest deduction. Unless you’re a renter, of course, which probably means you can’t itemize and you get slammed. Or that mileage and car leases are deductible if you’re in sales as a business expense. Unless, of course you live in LA, an hour away from your work, but can’t deduct a dime because getting to an office is not actually a business expense, and you get slammed. Even the well-meaning exemptions and deductions are unfair to those who can’t claim them. But the little exemptions for special interest groups, that may impact 1% or less of the population, are unconscionable windfalls to them, paid for by the rest of us.

Taxes are one of those things in life that nobody likes. But it’s absolutely wrong that your tax burden should be based upon your ability to get elected officials to write special exemptions into the law for you. And it’s absolutely wrong that your tax burden should be based on whether you’re engaging in perfectly legal activities that are a “sin”, like smoking, or a “luxury”, like buying a Lexus. The tax burden should be equally painful to all.

Taxes as behavior modification :: The Fair Tax Blog linked with Taxes as behavior modification :: The Fair Tax Blog
Posted By: Brad Warbiany @ 10:38 pm || Permalink || Comments (7) || Trackback URL || Categories: Uncategorized


  1. What about the flat tax or the consumption tax?

    Comment by Lucy Stern — May 24, 2005 @ 11:15 pm
  2. This reminds me of living in Los Angeles during the drought of 1990, which for all I know is still going on. After being warned endlessly about our need to conserve water, the Los Angeles Water Authority petitioned to have the price of water raised — not to tax consumption — but because conservation efforts had been so successful, that the Authority wasn’t getting enough cash in to pay for their expenses — which I assume included trips to places where water was more plentiful.

    Comment by Bruce Grossberg — May 25, 2005 @ 5:28 am
  3. Lucy,
    Excellent question. I wish I could say that the consumption tax or flat tax were completely fair in this sense. Unfortunately, no tax is completely fair, unless it is a per-person fee, universal for every resident (US citizen or not) for governmental services. However, the consumption tax or flat tax more closely approximates a truly value-neutral tax than anything we have today.

    Also, thanks to Dan from (now blogrolled) for pointing me towards his essay on flat tax proposals. I don’t think we can politically get a flat tax that has no loopholes or deductions whatsoever, but I agree with him that it would be the closer to the ideal tax than current “flat tax” proposals.

    Comment by Brad Warbiany — May 25, 2005 @ 8:19 am
  4. Brad,
    I utterly disagree with you about the smoking and alcohol taxes. These are items which nobody needs, and you know going into the purchase that the tax rate is higher. I would much rather pay higher taxes at the liquor store than ask poor families to pay 5.5% on top of their loaf of bread and gallon of milk. The biggest problem with these taxes is that as they raise the price of cigarettes, they will eventually run the tobacco companies out of business. But there are plenty of states that use the tobacco settlements to balance their budgets or cover shortfalls in revenue, so where will the billions come from when everybody stops buying Marlboros?

    By the way, Ohio decide not to increase the alcohol tax, but did raise cigarette prices by 25 cents per pack.

    Comment by JimmyJ — May 25, 2005 @ 9:16 am
  5. How about TV’s, Jim? We should probably increase the tax on those, because Americans spend way too much time in front of them. And that leads to less exercise, which leads to fat people, increasing health care costs for the rest of us? And how about luxury taxes as well, because buying a BMW instead of a Kia should get you slammed with say, and extra 15% sales tax or so (that’d be fair, right)? Maybe we can combine the two, and tax TV’s at 15% for anything under 25″, but anything above is a super-luxury and we should tax those at 30%? Or, we can be Detroit, and tax fast food because we don’t like it. Heck, let’s take it farther. We don’t need books, expecially when the government provides these nice libraries for us, so let’s tax those too. And cosmetic surgery, because that’s completely unnecessary, so we’ll tax that at 50%. Of course, we can’t just tax everything, we need to exempt certain things. Let’s exempt bicycles and treadmills, because they lead to exercise. In fact, let’s subsidize the purchasers of those, giving them money, for the good choices they’re making! Let’s exempt fresh food, because that’s healthy, and slam a 20% tax on processed food, because it’s unhealthy. Somebody stop me, I’m on a roll!

    The point is that there are about a billion things out there that people don’t “need”. There are countless different ways for “you” or “the majority” to determine which things are beneficial and which are not, which are needed and which are not, and how much we should tax or subsidize each. Why can you decide that alcohol and cigarettes deserve extra taxes, but that TV’s, luxury cars, etc etc do not? I’m a smart guy, and you’re a smart guy, but I’m not prepared to cede to you judgement of how much my behavior should be taxed. Why is it that you believe I should cede that judgement to you?

    Comment by Brad Warbiany — May 25, 2005 @ 10:02 am
  6. While I believe that a Flat Tax would tend to be more fair I am also aware of the greed involved when the government is involved. They will have “user fees” to take the place of income taxes to go along with consuption taxes. When you visit the zoo, there is a user fee, when you get your license plates there is a user fee. This will be expanded upon until, as the Beatles song says, “put rubber pennies on your eyes” and never forget, Washington has never understood that its our money, not their money. Until we get hold of the reigns and start reducing spending, which, unlike Washington’s definition of holding the growth of spending down, no, reduction of spending means to actually spend “less”; can you believe that such a simple thought is beyond our government leaders? Will the tooth fairy pay me for leaving a broken tooth under my pillow, will the Easter Bunny autograph my egg, and will congress ever reduce taxes; in your dreams…

    Comment by T. F. Stern — May 25, 2005 @ 8:41 pm
  7. [...] middot;  Category: Education, Special Interests (This entry originally posted May 25, 2005 at The argument is more for [...]

    Pingback by Taxes as behavior modification :: The Fair Tax Blog — September 23, 2005 @ 12:47 pm

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