TW: Silver takes a different angle on taxing drinking. There is much buzz about raising alcohol taxes yet again. When revenues are short sin taxes are always a favorite. Silver though suggests targeting the taxes to the bad outcome of drinking rather than the drinking itself. He proposes stiff fines/taxes on drunk driving. An $8K per occurrence fine would raise as much money as an increase in the overall alcohol tax.
This will never happen because our systems are not set-up for such innovation. Plus some folks like sin taxes because they literally like taxing "sins". But I like the concept.
From Nate Silver at 538.com:
"There's pretty good economic evidence to suggest that alcohol consumption is fairly sensitive to price. And there's lots of good economic (and commonsencial) evidence that alcohol consumption is associated with a wide array of undesirable outcomes, from increased highway fatalities, to decreased productivity at work, to increased violence against women, to worsened health outcomes. Increasing alcohol taxes would, therefore, almost certainly save lives.
One problem, however, which is somewhat unique to liquor consumption, is that these behaviors aren't particularly strongly associated with drinking unto itself. They are associated, rather, with drinking to excess and/or engaging in other, particularly stupid sorts of behaviors while doing so. I know the evidence on this is mixed, but many studies have suggested that moderate alcohol consumption is in fact associated with improved health outcomes -- especially if you're drinking red wine and especially if you're a guy. A person who has a couple of drinks a couple of days a week, and who never drives or has the compulsion to engage in violence while doing so, imposes virtually no negative consequences either on himself or on society. Drinking doesn't cause negative externalities in the same way that, say, driving (traffic congestion and pollution) or smoking (second-hand smoke) intrinsically do.
People say it's difficult to tax the undesirable behaviors associated with drinking without taxing drinking itself. But is that necessarily so?
In 2006, there were 1.1 million arrests for drunk driving in the United States (source), not counting Florida which didn't report its statistics. Fine each of those people $8,000, and you'd have almost about $9 billion more to pay for health care every year. Why $8,000? Because that's the figure, according to a 2001 paper (.pdf) by Steve Levitt (the Freakonomics guy) and Jack Porter, that would be required to internalize the negative externalities associated with driving drunk.* By the way, if you're concerned that this tax might be regressive, you could scale it according to a person's income, as they do for traffic fines in Finland.
Of course, if you were actually to fine people $8K every time they got a drunk driving conviction, you wouldn't raise quite as much as $9 billion. Faced with a choice between an $8,000 fine or a $20 taxi fare, a lot more people would have Yellow Cab on speed dial, and you'd have fewer revenue-producing arrests.** But this is a feature of the policy rather than a bug -- you'd be stopping drunk driving. Moreover, it's exactly the same feature/bug problem you'd run into by raising alcohol taxes in general, or any time you were trying to use tax policy to disincentivize an undesirable behavior.
...But a drunk driver tax would be fairer, more efficient, and more Pigovian than a beer tax -- and good luck to the liquor industry in trying to oppose it"
http://www.fivethirtyeight.com/2009/06/liberal-blogger-matt-yglesias-wants-to.html
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