Why government should tax spending rather than income

¶ … Government Should Tax Spending Vice Income

A "sin tax" is a specific type of tax that is levied on certain types of goods and services that the government has deemed unnecessary for individual consumption or action, and that society as a whole considers undesirable, but is nevertheless popular with many citizens. Predominant examples of this are alcohol, tobacco, and gambling. Alcohol and tobacco, for instance, move from an economic to a social issue because of numerous health and behavioral issues that result from use, and have a cost to society. Because of this, it is valid that the government be able to tax certain substances or activities.

The idea of sin taxing is designed not to punish, but to suggest that certain activities are not best for society: alcohol because it causes traffic issues, crime, social ills; tobacco because of the medical and productivity costs; and gambling because of its addiction and harm to society. Revenue generated by the sin tax is designed to help recover damages to society in terms of law enforcement funding, medical costs paid out of the social system, and other costs associated with negative societal effects (e.g. social work, etc.).

Those who oppose sin taxes believe that they trigger black market and smuggling operations that are criminal in nature and not taxed at all. This view also argues that sin taxes are regressive in nature and discriminate against the lower classes, since the taxation of products like alcohol and cigarettes do not account for an ability to pay tax, thus the poor pay more of their income by percentage and it tends to hurt them economically. Psychologically, this view holds that sin taxes fail to affect consumer behavior in the way that the government hopes -- for instance, instead of smoking premium cigarettes with less potential harm, they opt for cheaper brands and stock up on liquor sales. Finally, critics of sin taxes do not believe that it is up to the government to legislate behavior based on their view of products being good or bad; adults have the right to make their own decisions (Williams and Christ).

Proponents of the tax believe that certain items that are not necessary to the health and well-being of most individuals and that have a very real cost to society should be taxed for two specific reasons. If we take cigarettes for instance, over 400,000 people die annually from smoking, countless millions are spent on insurance and healthcare issues -- not just from smoking, but also from second-hand and passive smoking as well. Alcohol related injuries and deaths also amount to millions -- and alcohol has a proven effect on crime and productivity, as does gambling. People who overuse alcohol and tobacco, or become addicted to gambling, cause a considerable financial burden upon society that forces others to pay for treatment, law enforcement, social work, and other ancillary costs (Hoe).