Revenue streams approve dependence on addiction-driven behavior

State governments tax alcohol and tobacco technically in the same way as they tax other consumer products: they put a percentage mark-up on the price. The purported purpose is to make the products less affordable and thereby reduce consumption.

The reality of at least some addiction tax proposals is, however, that government wants more revenue. While Louisiana’s tax on cigarettes is set to fall from 36 to 32 cents in July of 2012, Rep. Harold Ritchie (D – Bogalusa) has sponsored a bill (HB 63) to reverse that and raise it to $1.06. It would also raise taxes on cigars and smokeless tobacco.

A MackinacCenterforPublicPolicy estimate suggests the higher taxes on tobacco would cost constituents an annual $362 million, up from $137 millionin 2010. And this initiative is gaining traction because the state’s finances have hit a wall, not because Louisiana’s health suddenly went sour.

LouisianaBudgetProject research also indicates higher taxes on tobacco would disproportionately burden the poor. Still, LBP’s director, Edward Ashworth, has spokeninfavor of the initiative, to ward off cuts to education, health care, and “vital investments in Louisiana’s future.” Apparently the 120 percentincrease in per capita state spending over the last two decades, accounting for inflation, wasn’t enough.

Last year, in a similar vein, Maine’s Democratic gubernatorial candidate, Libby Mitchell, proposed a renegotiation of the state’s liquor sales contract to raise money for higher education. And in 2007, the American Academy of Family Physicians urged Congress to raise the federal tobacco tax to fund expansion of SCHIP, so called Medicaid for children.

In Maine, a Democratic state legislator, Diane Russell, has even suggested that marijuana should be legalized and taxed, expressly to generate $8.5 million per year in sales tax revenues. Likewise, Denver politicians have considered raising the medical marijuana sales tax to fund crime prevention.

These examples have one common denominator: government makes one group of citizens dependent on the addiction-driven behavior of another group of citizens. In doing so government not only assumes, but actually expects, that the addiction-driven behavior will continue.

When government taxes addiction-driven consumption for the purposes of entitlement programs such as SCHIP, it sends an ethical message. The taxpayer’s addiction, which reduces his ability to function as a rational, self-determining member of society, becomes a critical source of revenue to government. Government thus morally approves the exploitation of the addiction.

A pot or tobacco smoker who is impaired by his addiction and cannot make rational choices for himself is considered virtuous because he helps fund, for example, children’s health care.

In a free society individuals can make rational choices that allow them to avoid a tax, partly or entirely. A taxpayer can avoid a tax on non-addictive behavior such as the tax on gasoline. By contrast, a tax on addictive behavior does not allow the taxpayer the same leeway. On the contrary, it is more likely that a taxpayer will remain a taxpayer if the act subject to taxation is driven by addiction.

Self-destructive, addiction-driven behavior is not motivated by rational choice. When government taxes such behavior for the purposes of a permanent revenue stream it de facto – though not explicitly – says that the non-rational behavior shall continue. Since the lack of rationality behind addiction traps people in their behavior, the tax exploits their lack of rational choice. The tax is by definition exploitative.

Sven Larson is a research fellow with the WyomingLibertyGroup. An earlier version of this commentary appeared here in Larson’s Liberty Bullhorn economic newsletter, available through You can also follow him on twitter.