Tax Smokers In the Name of Public Health, But Not Bad Drivers

July 25, 2007

The public outcry over Virginia’s new policy of extremely high driver’s fees is unfortunately a sign of hypocrisy within the general public with regards to government taxing bad behavior to fund a general government function. When cigarette taxes are proposed to fund general government programs as they have been recently at the federal level and as was passed in Virginia three years ago, there is/was little outcry. Yet the justification for such cigarette taxes is no different than the justification used for these Virginia driver’s license fees, as well as the arguments against them. Let’s take a look at them:

(1) “Taxing cigarettes will reduce smoking rates and thereby save lives (and save people from themselves).” Such paternalism is the same justification for seat belt laws and is no different from increasing fines on traffic violations in order to have people drive safely. “We’re just looking out for you.” “This higher fine for reckless driving (or cigarette tax hike) will save X number of lives. How can you be against that?”

(2) “Taxing cigarettes will reduce external costs imposed on others in society like higher health care costs and second-hand smoke.” The same case can be made for safer roads. Raising fines on drunk driving and speeding makes the roads safer as it encourages safer driving, and also reduces the costs imposed on government in the form of fewer accidents. (Actually, smokers save government money on net, but that’s another issue.)

(3) “High traffic fines will cause people to drive without a license or go without insurance.” Cigarette taxes have similar legal issues as underground crime has exploded as a result of the international black market for cigarettes.

(4) “Such fines disproportionately hurt the poor.” The same can be said for cigarettes. In fact, at the federal level, raising the cigarette tax is 37 times more damaging to the bottom 20 percent of Americans on the income scale than raising the federal income tax. It is safe to say that a cigarette tax is much more economically harmful to the poor than any traffic fine.

(5) “The spending priorities for this money are important.” Such an argument has been made in the SCHIP debate at the federal level where advocates want to pit children against tobacco, but such an argument ignores one fundamental point: broad-based taxes should be used to pay for general spending priorities, and/or optimal user fees should be established where all users of a service pay their fair share (like the gas tax to fund transportation). One can make this argument regarding any funding source, however arbitrary it is.

The truth of the matter is that a fine for an infraction should be set at the optimal amount in order to deter the activity because it imposes costs on others in society — just as cigarette taxes should be levied based upon their negative costs imposed on others in society and nothing more.

But as the people of Virginia are saying, there is such a thing as a fine that is too high – beyond the level that is deemed to be just for the purposes of reducing the negative costs imposed on society. And thereby arbitrarily choosing these individuals as a revenue source beyond this level is unfair and undermines individual liberty. Yet when it comes to cigarette taxes, which almost everywhere exceed any estimate of the negative costs that they impose on others in society, where is the outcry?

It seems to be that the only difference between these two issues is what James Madison would call the tyranny of the majority. Everybody speeds, but only a minority smokes.


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