Tuesday, 3 February 2015

Losing income from sin taxes shouldn't be a problem

I think I'll start with the conclusion of this post right here at the beginning for a change: If it's a problem for a government that they loose income from a so-called sin tax, it's not actually a sin tax. When I say sin tax I mean taxes designed to make people stop doing something that is bad for themselves, the people around them, the environment and so on. In other words... it's supposed to discourage people from doing something we don't want them to. So if you start losing income from a sin tax, you should be happy with that, and not desperate to find something else to tax like some politicians apparently are right now. Because losing income from a sin tax should mean that you are gaining somewhere else. Take tobacco taxes for example: If people stop smoking, whatever you loose in taxes should be more than made up for by the benefits of having a smoke free and thereby a lot healthier population: Health care expenses would be lower, people will be able to work more and generate more income taxes ... and so on. If this is not the case in your country, your government is a bunch of incompetent fools. Simple as that. If it is the case in your country, and the government still wants to cover the losses from a sin tax by taxing, well the e-cigarettes that are in part responsible for their so called losses, then they are equally stupid... or just greedy.

Some countries have made themselves dependent on sin taxes, other have not. I wrote a post on this almost a year ago. Back then I found that the US and Norway (hopefully among others) are not dependent on tobacco taxes, and should in fact, from a pure economic perspective, welcome anything that will stop people from smoking. So California Senator Mark Leno (from the Forbes article I linked to further up) is either stupid enough to not see this, or greedy. In any case he's lying when he proclaims this, cause this is definitely not the real reason he wants to tax e-cigarettes:
“We’re going to see hundreds of thousands of family members and friends die from e-cigarettes use just like we did from traditional tobacco use”
The UK on the other hand... are in deep shit in this matter. They messed up and need to find a way to make up for their losses, but taxing e-cigarettes (or anything else that can get people to stop smoking) will only get them deeper into the shit. It might "solve" their problem in the short term, but it will be like peeing in their pants when freezing...

photo credit: E-Cigarette/Electronic Cigarette/E-Cigs/E-Liquid/Vaping via photopin (license)


  1. 'Back then I found that the US and Norway (hopefully among others) are not dependent on tobacco taxes,'.

    I don't think that is true for the US. Have a look at the Master Settlement Agreement between the Tobacco companies and the US. Many States traded in their future receipts for a load of cash up front. Repayments are based on sales of tobacco which is dropping causing possible bankruptcy for states such as California.

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  2. I agree with the situation in the US with the Master Settlement Agreement basically ensuring that Tobacco sales are crucial for many states, hence their fears with ecigs. I call it "blood tobacco". The UK whilst generating c. £10 billion from tobacco taxes (ex VAT) should in theory not have such a financial issue, but what everyone forgets is the bigger picture. The UK relies on the working population to provide the current income for state pensions and other care required for the elderly. Having 20% of the population as tobacco smokers means that on average 10 years of pension and social care payments are not paid as smokers die younger. The long term financial impact if smoking was eliminated 20-30 years down the line equates to an additional burden that even the UK would find difficult. My back of an envelope figures calculates that if tobacco smoking didn't reduce lives, at today's prices the UK would need to find an additional £60-£70 million per annum in pension/social care funding which would mean significant tax increases for everyone. The 20% of smokers basically subsidise the 80% of non smokers and how this is addressed may well be the key problem. Currently tobacco smoking. despite all the stop smoking rhetoric is in fact a welcome evil.

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