My fiancée is right next to me enjoying Megan’s tremendous post on the obesity scare — I feel a special kinship to Peter now that we’re both engaged to freakishly smart and talented econobloggers — and I want to fire off a quick post about something that’s been nagging me for a while.
The justification for taxes on cigarettes is that smokers cost more to the public purse, right? Not because they smell bad, right? They cost more because they get cancer, right?
What if it was the other way around? What if smokers saved the government money? Because we do. We get cancer earlier. We die younger. We cost less in pensions and we even cost less in healthcare. What is so cripplingly damaging to the healthcare system is end of life care for the elderly, right? Postponing the inevitable by a couple months, right? End of life care is much cheaper for a 60 year old with untreatable cancer, whom you just put on a morphine drip, than it is for an 85 year old with about eleven different conditions.
So perhaps the ObamaCare plan or other healthcare systems around the world should create a cigarette subsidy to save money! Public service announcements explaining that the cool kids smoke! (Well, maybe not, that would drive the kids away.) If the purpose of a Pigovian tax truly is to reduce negative externalities, should we not go even further and tax gyms, and subsidize transfats?
It’s the right thing to do.
Look, just to be clear: this post is tongue in cheek obviously, but it hints at a real problem with Pigovian taxes and purely utilitarian public policy more generally.
The real reason we have tons of taxes on cigarettes is because 1- it’s politically expedient to raise taxes on a minority and 2- most people think “Ick, gross!” The negative externality argument is used to retrospectively justify a sin tax applied for moral, not economic reasons.
But this creates a pitfall: facts, as a great thinker once said, are stubborn. If your negative externality is actually a positive externality, the mask of your oh-so-utilitarian, oh-so-rational policy falls.
One of the reasons I don’t think of myself as a libertarian even though they’re the group whose actual policy preferences most closely mirror mine is because of things like this. Legislation reflects a society’s moral values. In fact, it should reflect a society’s moral values, consistent with individual freedoms, because it is what a democratic polis is all about: a nation deciding by which rules it wants to live.
Government can’t and won’t “just get out of our lives”, simply because what you describe as “getting out of our lives” isn’t the same thing as what I describe as “getting out of our lives”, and, until Jim Manzi finally succeeds at creating evidence-based social science, there is no scientific way to decide what government should or should not do — and nor should there be.
So if you want to disincentivize smoking through sin taxes, that’s perfectly fine. It’s okay to have public policy that disincentivizes bad things just because they’re bad, without having to make budget projections over the next 30 years. I’m willing to pay extra to feed my addiction. But don’t lie about the real reason you’re doing it.
And remember, next time you see me light up — I’m doing my part to save healthcare and pensions.