Sin Tax Syntax

Oranges within Apples by Osman Azami

There's some political taboo to raising taxes. With obvious exceptions, it's unlikely that a candidate can run for any political office—either as a Democrat or as a Republican—with the promise to increase taxes. The first exception that comes to mind is the exclusion of wealthier Americans. Majority of voters won't mind if their boss has to pay more in taxes. But, the lesser-known exception to the rule that raising taxes is bad politics is a sin tax.

In some ways, a sin tax is politically ideal for lawmakers. On the surface, the logic seems a little faulty. If the purpose of the tax is to discourage behavior and raise revenue, then if the tax successfully discourages "sinful" behavior, less and less revenue is raised. It essentially defeats itself.

Who's going to protest taxing cigarettes more? For the most part, nobody will. Even manufacturers and consumers don't care much since the extra cost is not really significant. To use economic terms, the "sinful" goods are fairly price inelastic. It doesn't matter how much you charge for the alcohol. People who want it will still buy it. Demand will be minimally affected by the increase in price.

So, do sin taxes actually discourage behavior or do they simply improve the fiscal situation of the state? It varies. For the most part, when it does discourage behavior, it's not the extra cost that acts as the deterrent but rather the simple taboo from the existence of a sin tax. Now, they know society thinks it's a sin.

Today’s 4/20—known as the national day of pot. I know. I had to make some mentioning of the elephant in the room. This is the time of year when the debate over the legalization of marijuana reignites. Rallies of thousands of people will be held across the country, and police usually won’t even bother with issuing possession tickets. However, this year, in November, voters in California will actually vote on whether marijuana can legally be sold and taxed.

Most state officials see the ballot measure as a budgetary concern—or at least advertise it as that. The state of California is in a fiscal wreck, and it needs something drastic to fix that problem. Supporters would argue if marijuana were legalized, not only would extra money be brought in through taxation but also even more money would be saved through reduced need for law enforcement and prisons.

As a historical parallel, from 1920 to 1933, alcohol was illegal in this country. Little did that matter. People still drank. They just did it secretly, and organized crime flourished. When the 18th Amendment was repealed in 1933, many argued—and correctly so—Prohibition did not stop alcohol consumption and only worsened living conditions. But, that certainly wasn't the only reason for the repeal. During the Great Depression, there was obviously staggering unemployment and a subsequent plummet in tax revenue. And, coincidentally, repealing Prohibition would counter that by creating jobs and increasing tax revenue.

Does this parallel AT ALL to the current battle over the legalization of marijuana? I think so.

For my "political" sake, I'll reserve any judgment of the morals and health concerns of the issue. I barely know the economics, and I certainly don't know the science.

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