Should “sin taxes” on alcohol and tobacco be increased to help pay for the increasing costs of medical care?

In many modern economies, sin taxes on alcohol and tobacco trade translate to per unit taxes or excise tax aimed at reducing particular social behaviors that are known to negatively impact on society.  From a historical perspective, sin taxes have been employed in the US since 1790 when Alexander Hamilton, one of the country’s founding fathers proposed exercise tax on alcohol, specifically whisky (Ostrom, 2014). This tax was to enable the US government to pay for Revolutionary War debts. Sin tax has therefore been used on matters of importance to the US government. Today, alcohol and tobacco are charged a sin tax as these two products are known to cost the economy nearly 20 billion dollars. These behaviors weigh heavily on the American health care system and as such sin tax should be increased so as to carter for the rising healthcare costs attributed to the two social vices.

One of the reasons as to why sin tax on these two products should be increased is that this has been noted to be quite effective towards improving overall public health status in the past. More so, sin taxes today should be designed to attract more revenues for improving health care provision. According to Mayo Clinic (2013), if sin tax on tobacco packs alone could be increased by 50%, revenue generated over a single decade could translate in 80 billion dollars in revenue collection. If alcohol tax was to be increased by 30%, tax revenues could increase by more than 25 billion dollars per annum (Mayo Clinic, 2013). These resources if channeled to the health care sectors could translate into subsidized Medicare for the uninsured populations, create a buffer for fiscal shocks associated with healthcare budget provisions, and improve on the current healthcare infrastructure as well as providing funding for biomedical research.

Sin taxes are also a good way of encouraging the society to quit undesirable habits. More so, this can be viewed as a less costly option compared to rehabilitation and offering healthcare for otherwise negative lifestyle behaviors (Williams & Christ, 2009). It is important to point out that many smokers and alcoholic drinks consumers do so at a young age, in their teenage years and early adulthood. Imposing heavy taxes on these two commodities could serve as a deterrent to such outcomes. Monies sourced from alcohol and tobacco sin tax can be used to enhance on social awareness of the negative impacts associated with these two social lifestyle behaviors. Money spent by these young American people can be channeled to more meaningful things which have positive social outcomes and more so improved health status.

In the recent past, there have been instances where economic depreciation has resulted in millions of people being pushed in to the poverty level. Demographic age groups, increases in chronic illnesses as well as the rising costs of therapeutic treatment for diseases associated with alcohol consumption and tobacco smoking have negatively on the effectiveness of contemporary health care policies (Williams & Christ, 2009). On average the older populations have less disposable incomes as compared to the other populations. This is especially the case as most of them rely on the pension and insurance cover to access health care. Older people who engaged in smoking tobacco and consuming alcohol in their younger years have more health complication and as such are more likely to spend more on healthcare. Economic meltdowns have resulted in the devaluation of the money they poses as the cost of goods and services skyrockets due to adverse economic conditions. On the other hand, alcohol consumption and tobacco smoking has resulted in the prevalence of numerous lifestyle related diseases (Williams & Christ, 2009). These include obesity, hypertension, and cancer just to name but a few. These chronic diseases are expensive to treat and in many cases have even resulted in deaths among younger people. This has also led to lost economic opportunities for their societies as skilled individuals succumb to the health and social consequences related to these social vices.

However, sin taxes are considered to negate the notion of free will, core finance and economic principles and as such even with the best intentions in mind they have to have a negative impact on the society. On the economic perspective, sin taxes are said to be ineffective as they concentrate on a very narrow section of basic consumer choices. Sin taxes are also argued to be ineffective towards reducing the prevalence of sinful social behaviors as in most cases tend to favor the organizations and politicians who lobby for the implementation of these taxes. It has also been argued that most of the people likely to be most affected by sin tax are in the lower demographic part of the society, those who cannot afford healthcare in the first place. As such, the well off in society would not mind to pay such taxes and more so can afford healthcare.

References

Mayo Clinic. (2013). Smoking, sugar, spirits and ‘sin’ taxes: Higher price would help health. Retrieved on June 15, 2014 from http://www.sciencedaily.com/releases/2013/06/130603135517.htm

Ostrom, C. M. (2014). Making Sin Pay — Raising The State’s Alcohol And Tobacco Taxes: A Lifesaver For The Budget, Or A Pandora’s Box? Retrieved on June 15, 2014 from http://community.seattletimes.nwsource.com/archive/?date=19930314&slug=1690286

Williams, R. & Christ, K. (2009). Taxing Sin. Retrieved on June 15, 2014 from http://mercatus.org/publication/taxing-sin