Friday, July 27, 2018
If laws designed to penalise bad behaviour don't work,
why do 'experts' and 'intellectuals' still pursue them?
A sin tax is often seen as a win-win strategy. It either compels consumers of unhealthy products to give up their filthy habits or, should they stubbornly refuse, forces them to pay in advance for the costs they will one day impose on the public health system.
Those with a more realistic understanding of human nature - that is non-academics and ordinary wage earners - know that people don’t work that way. In practice, consumers are not so easily controlled, and the best intentions of social engineers almost always backfire.
The tobacco tax is a good example. Only last year the Health Department was singing its praises. “Tobacco consumption and rates of smoking in Australian are at record low levels and falling,” it said in the 2016-17 Budget review, in which an annual 12.5 per cent increase in the cigarette tax was implemented. The review also said that the December 2015 quarter recorded the lowest official cigarette sales since estimates began in 1959.
However, smokers have since increasingly defied the busybodies who disapprove of their habit. Expenditure on tobacco products rose 2.6 per cent in the December 2017 quarter, year on year. “This is a worrying reversal of a long-term trend,” University of NSW health academic Colin Mendelsohn told The Australian. “We have to accept out punitive methods of taxing and coercing smokers are no longer working.”
The fiscal arguments for tobacco tax as a way of transferring money from smokers into the government coffers also fails to take account of the behaviour of consumers. An increasing proportion of tobacco consumption is, according to a KPMG study in April this year, in illegal, untaxed products.
The other entirely predictable but unforeseen consequence of sin taxes such as the tobacco tax is that they punish the poor. In Australia, only 9 per cent of the richest 20 per cent of the population indulge in tobacco; the equivalent figure at the opposite end of the socioeconomic spectrum is 20 per cent, according to the Bureau of Statistics.
It is becoming increasingly difficult for advocates of the tax to ignore this inequity. Even the Conversation, an academic website that normally yields to nobody in its enthusiasm for the overarching morality of a nanny state, concedes this idea is badly flawed.
“Low-income smokers who continue to smoke will have to spend more of their limited incomes on tobacco, potentially foregoing other household expenses, like food,” it said last year. “Poorer smokers will also be further stigmatised by continuing to smoke.”
New research from Christopher Snowdon, at British think
tank the Institute of Economic Affairs, says the regressiveness of sin taxes is irrefutable.
“Expenditure on food, alcohol, tobacco and soft drinks makes up a greater part of household spending among low-income groups and, therefore, any increase in price has a greater impact on them,” he says. “In the case of sugary drinks, tobacco and some ‘junk food’, low-income groups not only spend a greater share of their income on them, but also tend to spend more money on them in absolute terms. There should be no debate about this. It is a basic truth that can be easily demonstrated empirically, and countless studies have done so.”
The MRC’s own research into the proposed sugar tax, published in January, reviewed five recent and often-cited studies into sugar taxes, four of them from Australia. Our report found that none of them explicitly considered the equity effects of the tax.
Yet the Australian Medical Association, the Greens, the Obesity Policy Coalition and some high-profile journalists at the ABC, among others, remain strong advocates of the tax.
Why do they support a policy that so clearly punishes the poor and the companies from which they choose to buy products? In his new book, Suicide of the West, US writer Jonah Goldberg says the advocates of punitive laws have their own selfish motives.
“Capitalism’s relentless assault on tradition and custom creates a market opportunity for intellectuals, lawyers, writers, artists, bureaucrats and other professionals who work with ideas to undermine and ridicule the existing system,” he says. “Intellectuals surely have a financial motive in arguing for a system in which intellectuals would run things, but they also have a psychological one… We are wired to want to have higher status than others.”
Hence the Conversation’s assertion that poor smokers are “stigmatised” by consuming a legal product. Sin taxes say as much about the moral vanity of intellectuals and bureaucrats as they do about the people they are supposedly designed to help.