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The "Sin Tax" Debate

Feb 16, 2009
Dear John:
   One of the problems of being an idealist is that I don't compromise very well.  I've come to the conclusion that my role in these debates is to state the ideal and then grind my teeth while others compromise.
   Your idea of raising the gas tax while offsetting it with a reduction in the payroll tax would probably be an idea I could compromise with.  But a reduction in payroll taxes is not likely to happen while a rise in the gas tax is, especially since people who have a prominent voice seem so willing to concede it.
   I understand the concept of the Pigovian tax.  Lay terminology often refers to it as "sin" taxes, i.e., cigarettes, alcohol, carbon taxes, and likely soon to be firearm taxes, fat taxes, and who knows what else.  The problem I have as it is applied here is that it implies that gasoline use is a sin.  While it is appropriate to make the public aware of the risks, there is substantial evidence to cast doubt on fossil fuels' contribution to climate change and zero conclusive evidence that it does (an entirely separate debate, I know).  In fact, I would argue that fossil fuels are such a cheap and efficient way to run an economy that the wealth that it creates allows for better care and improvement of the environment than if we are forced, via sin taxes, to go without them.   As such, the risk posed to our standard of living presented by socialist solutions to these problems is greater than the risk posed by the problems themselves. 
   However, the main point of my aversion to a tax increase is to offer some means to discipline government spending.  It bothers me that so many people will now concede to tax increases, largely out of guilt - either self-imposed or through brow beating from politicians - for the maniacal spending taking place.
   I'll recommend a book, "Atlas Shrugged".  Perhaps you've heard of it.  If not - check it out. It was written in the 1950's by a woman who grew up in Russia but emigrated here in the late 20's.  The story depicts a United States marching toward socialism (eerily similar to today's issues) and reveals the virtue of reason and self-interest in a capitalist economy.  But it's quite a project...1100 plus pages.  Tackling a book of this size was a new frontier for me.  But it helped me legitimize the values I hold - so many of which have come under attack.

Sincerely,
Gary Anderson

JOHN'S REPLY:

Gary,
   Your points are well taken and have also matched my positions at times.  The payroll tax reduction is seriously being considered and gas taxes will be going up for revenue purposes alone in CA and IL pretty soon.  The Pigovian nature of gas taxes are well outlined here, and much better than I can express.  The bottom line it is not based solely on climate change worries.
   Ayn Rand was almost required reading back in my college days and I have marched through Fountainhead and Atlas Shrugged both.  Her stark depictions make for powerful arguments, but questionable social and economic policy, I think.  Worse still, the emerging field of behavioral economics is offering physiological reasons why our hard-wiring will make rationalism difficult to embrace.
   As well, I bought into the "starve the beast" arguments offered in the '90s to control spending.  But it it now clear to me that Republicans will ignore fiscal discipline for socially conservative and political reasons and Democrats are only beginning to recognize the well is about empty.
   These are unique times, and I appreciate your good humor and articulate comments.  Thanks for watching.  You might also enjoy checking my blog from time to time, where I go on at much greater depth about these and other matters.

 
John
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COMMENTS (1 Comments)

Anonymous
I have no problem with the ideal social system of Capitalism and Ayn Rand's depiction of it in her novels and nonfiction is very rational to me. Makes a lot of sense.
11:07 AM Feb 17th
 

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