“Sin Tax” and Healthcare
March 2, 2015
“Sin Tax” and Healthcare
Due to rising costs in healthcare, the U.S. Government is faced with the task of finding new ways to generate much needed revenue to cover healthcare expenses. One way of generating this revenue is by increasing taxes on items and activities that are considered to be “unhealthy,” like alcohol, tobacco, and legalized marijuana, in the form of “sin taxes.” Generating revenue through this form is considered to be a “win-win” because of the revenue generated and the cutback on “unhealthy” activities. Although, increasing “sin taxes” on these items may seem like a great idea, research has led me to believe that such ...view middle of the document...
A chart on the share of income lost to alcohol and tobacco taxes by income level, found in a report published by the Washington Alliance for a Competitive Economy (2005), shows that lower income taxpayers pay a higher proportion of their income in alcohol and tobacco products, as opposed to higher income taxpayers. The result of increasing taxes on these items could leave the heads of low-income households with some serious decisions to make; like do we eat or pay the light bill, especially those who are addicts. Black (2006) stated, “In the fact of a sin tax hike, an egoistic or addictive head who controls the household budget may simply take money away from other members to maintain his own level of consumption and satisfy his addiction.” Black (2006) also raises the point that if an addictive head cannot afford to buy “quality” products, they may put their own health at risk by finding a cheaper replacement of “lower quality,” resulting in increased healthcare cost for the head, at the expense of the welfare of the other family members.
With the negative effects of increased “sin tax” on low-income families established, and the issue of addiction discussed, household heads who are in search of cheaper alternatives, might result to purchasing products through the “black market,” rather than stopping the behavior altogether. Increased searching for cheaper products through the “black market” can increase criminal activity. According to the California Foundation for Commerce and Education study (Greenhut, 2013), increasing tobacco tax “may create the unintended consequence of increasing organized crime in California. Not only has cigarette smuggling been linked to increases in organized crime in California, but a press release found on the website TobaccoFreeKids.org International Edition (2009) discusses a part of the investigative series titled “Tobacco Underground” that has linked cigarette smuggling to at least six terrorist groups. Groups like al-Queda, the Taliban, and Real IRA have found cigarette smuggling to be a legitimate source for funding their activities due to high profits and ease at which cigarettes can be smuggled because of their small size and weight. President of the Campaign for Tobacco-Free Kids, Michael L. Myers (2009) said, “This report shows that curbing illicit trade is crucial not only for health and economic reasons, but also to protect national and international security.”
The financial impact of the revenue to be generated by increasing sin tax to fund healthcare costs should also be discussed. Curtis Dubay (2009) stated that, “If Congress enacts sin taxes to pay for increased government spending, deficits will actually rise in the long run because these taxes inevitably raise less revenue than anticipated.” While research has shown that increasing sin taxes can result in an increase of revenue over a short term, whether due to decreased spending on tobacco and alcohol...