Sin Taxes: Too Paternalistic or Promoting Self Control?
Victoria Zuzelo
Econ 330: Behavioral Economics
Eric Schulz
3/5/14
I. INTRODUCTION
Behavioral economics is relatively new field that is challenging the basic assumptions of the standard economic model. It iterates that people are not entirely rational actors, are not completely self-interested, and do not always hold time consistent preferences (Schulz Lecture). These notions have the potential to radically impact the way economic policy is executed in the United States because it can change policymakers’ understandings of how people act. One major area of influence behavioral economics has is changing how taxes are implemented and what objects are taxed. Taxation is essential for government survival and taxes have the power to create (allowing for the welfare state) and destroy (excessive taxes on alcohol and tobacco). This paper will focus on taxes’ ability to destroy, in particular how taxes can be used to prevent activities deemed unhealthy or wrong.
In particular, this paper will look at “sin taxes” and their effects through the lens of behavioral economics. Sin taxes are a type of excise tax, which are levied on immoral or socially harmful substances such as alcohol, tobacco, gambling, and unhealthy drinks. While sin taxes have been a topic of hot debate in regards to finding ways to fund increasing health care costs, the concept of a sin tax is nothing new in the United States. However, its purpose has changed over time. Originally, sin taxes were predominantly “[…] enacted as wartime emergency measures, and were repealed when hostilities ended” (Williams & Christ 2009), whereas they are now used to curb proscribed habits. The first s...
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...ng and sugary foodstuffs, this may be counseling to help them understand what triggers their smoking or unhealthy food. Additionally, I believe that subsidies for healthier alternatives are also an option that falls more in line with the libertarian paternalistic way of thinking because it does not eliminate choices. For example, the government could provide subsidies vapor cigarette companies—if FDA testing proves that they are healthier than cigarettes—that would make them significantly cheaper than smoking tobacco cigarettes. Nonetheless, behavioral economics, psychology, and neuroscience undoubtedly can help guide governmental policies into helping those with self-control issues in ways that they have not done so before. The standard economic model is not enough when working with addictive substances because it is clear that consumer do not act rationally.
Drenkard, S. (2010). Overreaching on Obesity: Governments Consider New Taxes on Soda and Candy. Retrieved from http://heartland.org
We live in a “recreational drug culture”, with the current criminalization of illicit drugs being driven by the common but not entirely universally accepted assumption that negative externalities will instead be placed in on society. Addressing the seemingly ever-infinite "war on drugs", in "Why We Should Decriminalize Drug Use", Douglas Husak argues in favour of the decriminalization of drugs in terms of not criminalizing the use of such recreational drugs. In this paper, I will dispute that Kusak 's argument succeeds because of the lack of justification for prohibition, and the counterproductiveness and how numerically evident the ineffectiveness of these contemporary punitive policies are.
Prohibition not only failed in its promise to curb the social problem created by alcohol. It actually promoted s...
In his article “What You Eat Is Your Business,” Radley Balko emphasizes that we ought to be accountable with what we eat, and the government should not interfere with that. He declares that the state legislature and school boards are already banning snacks and soda at school campuses across the country to help out the “anti-obesity” measure. Radley claims that each individual’s health is becoming “public health” instead of it being their own problem. Balko also states, “We’re becoming less responsible for our own health, and more responsible for everyone else’s.” For instance, a couple of new laws have been passed for people to pay for others’ medicine. There is no incentive to eat right and healthy, if other people are paying for the doctor
During the duration of this paper, I will discuss an issue that has been controversial for over a century; prohibition and how it has effected, currently effects, and will, most likey, continue to effect American society. The aspects that I choose to address from this issue are political, historical, they make you wonder, and they should effect anyone who reads this paper. For decades, the American government has had a restriction or ban on drugs and alcohol. Also for decades, these restrictions have been met with resistance from our society. In the early twentieth century, from 1920 through 1933, it was the prohibition of alcohol. A corrupt time, in which, so called, "criminals" and law makers both manufactured and sold bootlegged alcohol. There was high demand then and everyone was in it for the money, everyone. A time which proved to be a failed attempt by the government to take away what is now one of the United States' top commodities. During the 1970's President Richard Nixon started an ongoing "war on drugs" and every president since Nixon has continued this fight to, somehow, rid the entire country of illicit drugs. Today, a few states have taken a new approach to one of these drugs and eyebrows are being raised to the war on drugs all together. States, such as, California, Washington, and Calorado have loosened their tight grip on prohibiting marijuana and even have medical marijuana dispenseries. This idea has been proven to have boosted those economies, and it has allowed people with cancer to use a medication that actually gives them comfort. However, marijuana is still illegal. Why would we restrict the nation from something that beneficial...
...ests that autonomy does not have much breathing room. I am a supporter of paternalistic intervention because I have seen what smoking has done to many people around me as well as to myself. Knowing the side effects and damage smoking can do, I do not see how someone can knowing choose to pick up a cigarette. I know it is an addictive habit because I was a smoker for two years and it has been the hardest thing to quit for me. It started with peer pressure and naiveté. I was in a mindset of “that can’t happen to me”. I knew all of the horrible things it could do to you because my grandfathers and father were smokers and I looked at it as a disgusting habit. Boy, how your views change when you are making the decision for yourself. I believe that paternalism is a good thing to have, especially in cases where the outcome of the decision is not foreseen clearly.
Reiter, Jendi, “Citizens or Sinners? The Economic and Political Inequity of Sin Taxes on Tobacco and Alcohol Products.” Columbia Journal of Law and Social Problems. 1996.
Thornton examines the understood belief that alcohol prohibition failed. The examples he uses apply to drug prohibition and any other government attempt to control and restrict consumer habits. Thornton first discusses the history of prohibition laws, mainly focusing on American implementation of prohibitionist policies. He follows up with the theoretical bases upon which prohibition advocates rely, and thoroughly exposes them as false. After investigating the history and theory of prohibition, Thornton exposes the effects of such policies on the potency of illicit drugs. He explains how prohibition unavoidably creates incentives for producers to increase the potency of drugs and alcohol products distributed through black
The question of what is the government’s role in regulating healthy and unhealthy behavior is one that would probably spark a debate every time. Originally, the role was to assist in regulating and ensure those that were unable to afford or obtain healthcare insurance for various reasons would be eligible for medical care. However, now it seems that politicians are not really concerned about what’s best for the citizens but woul...
Recreational drug use has been controversial for years. Government has deemed the use of certain drugs to be dangerous, addictive, costly, and fatal. Governmental agencies have passed laws to make drugs illegal and then have focused a great deal of attention and money trying to prohibit the use of these drugs, and many people support these sanctions because they view the illegality of drugs to be the main protection against the destruction of our society (Trebach, n.d.). Restricting behavior doesn’t generally stop people from engaging in that behavior; prohibition tends to result in people finding more creative ways to obtain and use drugs. However, just knowing that trying to control people’s behavior by criminalizing drug use does not work still leaves us looking for a solution, so what other options exist? This paper will discuss the pros and cons about one option: decriminalizing drugs.
Everyone has their own political leaning and that leaning comes from one’s opinion about the Government. Peoples’ opinions are formed by what the parties say they will and will not do, the amounts they want spend and what they want to save. In macroeconomic terms, what the government spends is known as fiscal policy. Fiscal policy is the use of taxation and government spending for the purposes of stimulating or slowing down growth in an economy. Fiscal policy can be used for expansionary reasons, which is aimed at growing the economy and increasing employment, or contractionary which is intended to slow the growth of an economy. Expansionary fiscal policy features increased government spending and decreases in the tax rates as where contractionary policy focuses on lowering government spending and increasing tax rates. It must be understood that fiscal policy is meant to help the economy, although some negative results may arise.
In the period of Obamacare, there is a sound argument that there is a need for greater restrictions on who has access to healthcare on the normal premium’s minimum premium model or through Medicare/Medicaid. The question that has to be asked is if those individuals, which assume a risk through an unhealthy lifestyle, should pay the same premiums as those individuals who live a healthy lifestyle. There is obviously a discussion of degrees in such a debate (i.e. the individual who eats unhealthily in a manner that has limited health impacts is different from the smoker or the obese person). Eating and obesity are a contentious subject when it comes to health care restrictions, because food is a necessity. However, tobacco is not a necessity and is known to be a significant detriment to the individual’s health. Inferentially, the case supporting a health tax for cigarettes, smoking and tobacco is different the debate over the tax for unhealthy eating and obesity. Thus, there should be a health tax in the case of tobacco consumption is necessary, because the individual who smokes is assuming risks that are detrimental to his or her health.
F J Chaloupka, K. M. (2002). Tax, price and cigarette smoking: evidence from the tobacco documents and implications for tobacco company marketing strategies. Tobacco Control, 62-72.
1) Tax is the amount of money demanded by government to financially support the economy. The main two types of tax are direct tax and indirect tax. Direct taxes are levied on the income, property, or wealth of an individual (e.g. Income Tax & Corporate Tax). Direct taxes tend to be progressive, efficient, and flexible. However some will also argue that it encourages tax evasion, disincentive to work, tax havens which results to leakages, and is unpopular with the electorate. On the contrary, indirect taxes are charged upon goods and services, thus affecting citizens indirectly (e.g. VAT & Council Tax). It is effective because it let the people decide whether or not to pay it. However, taxes like VAT are regressive towards citizens.
Education interventions would include things such as providing tobacco counseling through insurance programs. This would help people learn why they need to stop and would be immersed in people who can motive them to do so. Motivation incentives would include things such as rewarding students in schools with low smoking rates. Likewise, innovative changes would house interventions such as reducing the nicotine in cigarettes, encouraging the use of e-cigarettes, and examining the use of prescriptions for cigarette cessation drugs. Lastly the following would fall under the umbrella of obligatory interventions: no smoking rules on campus, higher taxes on tobacco, higher auto insurance for adolescents who smoke, and testing athletes for nicotine. Individuals would have no choice to ignore these concepts and would be left with no options but to face the consequences or quit