Good arguments against sin taxes

Burdened by unfunded public pension liabilities and healthcare costs, state and local governments are in bad shape, considering the willingness of voters to embrace new spending proposals and their general reluctance to pay taxes to finance them.

Responding to the latest round of public budget "crises," policymakers around the country have begun reviving an old, but not necessarily good idea with added enthusiasm?taxing "sin." What better way to raise revenue than to find something that your neighbor buys or an activity he engages in that you don't like and tax it?

You could argue that the whole Bureau of Alcohol, Tobacco, and Firearms is about "sin taxes".  Read the whole thing, but I want to call out a specific part of the article for a little extra commentary:
Millions of dollars have been spent to thwart taxation of the soft drink industry's products and to prevent existing taxes from being raised. In 2009 alone, the industry spent more than $57 million on lobbying. Such lobbying expenditures are socially wasteful. How much money is now being spent attempting to block Mayor Bloomberg's ban on 32-ounce soft drink containers?
It's obviously not in the public interest for government to constantly threaten to tax or ban items the public desires to use and considers worth the costs.  Nonetheless, we frequently see our elected "representatives" making exactly that sort of threat.  Why?

There are a couple reasons, most of which are touched on in the original article.  Revenue for the public coffers that is taken from only a subset of voters is one significant reason, but there is another, subtler way that revenue is involved.

Consider: what happens when a politician leaves office?  Sure, sometimes they leave in disgrace after a scandal and spend time in rehab or jail... but what about the more typical case of a Washington politician who retired from a federal government position or lost an election?  Well, lots of them become... lobbyists.

Sin taxes -- and many other ways that the government is an intrusive, bullying busybody aggressively involving itself in as many lives as possible in the most annoying way possible -- represent what amounts to an investment in a politician's retirement plan, because corporations pay lobbyists huge sums of money to make annoying government laws and regulations go away.

Sometimes the lobbying succeeds, sometimes it doesn't, but companies have to pay because the lobbying is cheaper than the threat of regulations and cheaper than the legal costs of challenging an unbearable regulation in court. 

"Nice industry you have here.  Be a shame if someone regulated it."

What if a politician actually believes in the laws and regulations they passed, though? 

Don't worry, that never actually happens. 

However, sometimes a politician anticipates running for office again and wants to avoid the appearance of corruption by lobbying against things he might want to vote for, or did actually vote for in the past, or the like.  In that case, he doesn't go into the lobbying industry.  Instead, he goes into consulting, where companies pay him millions of dollars for his expertise in following the laws he played some part in drafting, amending, or hell, even just flipping a coin and voting on.

This entry was published Tue Mar 26 23:22:09 CDT 2013 by TriggerFinger and last updated 2013-03-26 23:22:09.0. [Tweet]

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