Snooki Tanning-Bed Protest Splits Sin From Taxes: Amity Shlaes
Commentary by Amity Shlaes
Aug. 3 (Bloomberg) -- Snookered by Snooki. That’s what President Barack Obama probably felt after the reality TV celebrity introduced race into the discussion of a new tax on tanning.
“McCain would never put a 10 percent tax on tanning,” the “Jersey Shore” star, whose real name is Nicole Polizzi, said of the man who lost the election to Obama. “Because he’s pale and would probably want to be tan.”
Once again, Obama found himself on the defensive about a racial matter.
Snooki managed to put her browned finger on an important weakness plaguing all of Washington. Call it tax sanctimony. Presidents and lawmakers demonstrate this condition when they link a tax to a social purpose. This pairing is disingenuous, wastes political energy and, in the long run, actually deprives federal coffers of needed revenue.
The tanning-bed tax is a fine example. The administration and lawmakers no doubt told themselves they’d get away with this tax since most voters would approve of penalizing those who seek an indoor tan. After all, research suggests tanning beds triple the risk of melanoma.
The first problem with this is that imposing a tax to improve public health doesn’t always succeed as policy. That’s partly because tax laws can’t keep up with scientific research, says J.D. Foster of the Heritage Foundation.
More Wine, Please
Recent research suggests there are health benefits to consuming a moderate amount of wine. “So what do we do now” asks Foster, “subsidize the first two glasses and place penalties on the third and fourth?”
Another trouble is that people don’t like government moralizing. If there’s one thing people dislike even more than taxes, it’s being told what to do.
In the tanning-tax case, politicians will have to waste what is to them more than the equivalent of the $2.7 billion in revenue their silly levy will bring in.
It is time our lawmakers adopted a cheerful, cynical attitude toward all sin taxes, those on tanning, cigarettes or other products upon which Americans generally frown. Then the lawmakers can rake in multiples of $2.7 billion with ease.
The best example of such opportunistic generosity was demonstrated by President Franklin Roosevelt in 1932 and 1933. Roosevelt and the Democratic Party saw that the nation was weary of Prohibition. So they ignored the moral question altogether, colluding to amend the Constitution and repeal the Volstead Act. The New Dealers then proceeded to tax the heck out of liquor, ignoring those who pointed out that liquor taxes were regressive.
Honest Deal
In other words, the New Deal made an honest deal with the people: the public gets to drink, and the government gets a new tax. That agreement would have failed if liquor were already legal. But it wasn’t. Roosevelt knew that Americans would view the shift from no beer to taxed beer as a net improvement and stand, or wobble, behind him.
The revenue rolled in. In 1940, liquor taxes represented 11 percent of all tax revenue. Taken together, tax revenue from liquor and tobacco sales accounted for more federal revenue than the income tax.
As luck would have it, a similarly intoxicating opportunity now exists for Obama. People feel about marijuana today the way they felt about liquor when FDR became president. Americans are increasingly supporting legalization of the drug. For the first time in memory, it seems conceivable that a president might be able to push legalization through Congress.
Grateful Heads
If the administration backed the legalization of marijuana, consumers would be so grateful that the government could tax the heck out of the herb. The revenue Washington would draw would be several multiples more than those from a tanning tax.
Or our leaders could suppress all scruples and just jump into the marijuana business outright. As Stephen Easton, an economist at the free-market Fraser Institute in Vancouver has written, Canada’s experience with legal marijuana suggests that the U.S. federal government can raise as much as $100 billion in revenue.
But such a tax policy would mean decoupling moral questions from revenue needs. Neither party is ready to make that move. Republicans love to provide incentives while Democrats prefer disincentives.
Americans generally seem to prefer that marijuana legalization happen for medical reasons, and gradually, state by state. That means that the forthcoming marijuana debates will be narrowed to tedious entitlement debates about whether and how Medicare and Medicaid will cover marijuana use. Pot may well turn out to be a tax burden, not a tax break.
The greater economic reality is that a simpler tax code with fewer distorting incentives and disincentives tends to increase economic efficiency. Such efficiency yields the growth that in turn also gives the government dollars to spend on pet social causes. As it manages Snookigate, Washington might want to start repeating the following mantra: Taxes are for revenue, and there’s nothing sinful about that.
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