Sin taxes: taxing your vices

[angelburst29]

I came across this short article on an accounting website that did some research on vices, namely cigarettes, liquor/beer and gambling/lottery.

http://www.online-accounting-degrees.net/sin-taxes/

Federal and local governments are taxing our vices...big time. These taxes, known as "sin tax", generate revenue and affect purchases. So, how much would my smokes cost without all the taxes?

- A sin tax is added to products or services considered to be unhealthy. States collected $50 billion in 2011 because of the tax.

Getting "smoked" by The Man

- Cigarettes are the most heavily taxed consumer good in the world
- 58% of the price of cigarettes is a result of excise taxes (SEE CHART)
- Cigarette price equation: state sales tax + federal tax of $1.01 per pack + additional fees + average price of cigarettes
- Cities and counties can add additional fees and taxes
- Cities with the highest additional fees
- 1. New York City ($1.50 per pack) plus New York State ($4.35) $5.85 per pack
- 2. Chicago ($0.68) plus Cook County ($3.00) plus Illinois ($1.98) $5.66 per pack
- 3. Evanston ($0.50) plus Cook County ($3.00) plus Illinois ($1.98) $5.48 per pack
- States' Average is $1.53 per pack
- States with the highest cigarette tax
- 1. New York, $4.35
- 2. Massachusetts, $3.51
- 3. Rhode Island, $3.50
- New York's cigarette tax increase from 2000 to 2010:
- 2000: $1.11
- 2002: $1.50
- 2008: $2.75
- 2010: $4.35

Taxes make me want to drink, but I can't afford it

- Excise tax rates for wine are applied per gallon
- As of January 2013, Kentucky holds the highest rate and Louisiana the lowest
- Kentucky
- $3.15/gallon
- 11% wholesale tax + $0.50/gallon
- Louisiana
- $0.11/gallon
- Additional fees include $1.59/gallon for sparkling wine

So, you're saying the government actually wins the lottery...every...single...time...?

- Cash and noncash gambling winnings are fully taxable regardless the amount
- The payer must get your Social Security number and inform the IRS of the extra income you received from the winnings if:
- You pocket $600 or more (and that amount is 300 times your bet) at a horse track
- Win $1,200 at a slot machine or bingo game
- Take $1,500-plus in keno winnings
- The payer generally will reduce payout by withholding federal taxes at a 25% rate in addition to requiring the winner to fill out a W-2G form
- Refusal to give a SSN could result in a 28% tax withheld from the player's winnings at the time of payout.

 

[Courageous Inmate Sort]

There is a Latin phrase, "Pecunia non olet" (money does not smell), which is used to justify taxing just about anything, many times even resources received from illegal activities.

The rationale is usually to tax at higher rates that which is considered superfluous or undesired by the government. So tobacco and alcohol are typically subject to very high taxes. But also "non sinful" things like cosmetics (make up) may also be highly taxed because they are deemed superfluous.

Regarding tobacco, I believe that roll your own is usually taxed at lower rates than industrial cigarettes, so one more reason to get away from those.

Governments really abuse their taxing powers. One recent and dramatic example is the US FATCA legislation, which imposes taxing and reporting requirements to foreign companies and governments.

Besides the frustration of the pervading and abusive taxation, I think the worst part is how ill spent are the tax revenues. In the case of the US, the military industrial complex and its many wars, in Brazil the corruption that directly lines the pockets of politicians and their associates etc.

We pay taxes and they build schools and universities that teach bad science; fund researches that need to conform to previous incorrect dogmas; buy medicine from Big Pharma that is more likely to kill you than anything else; give incentives to industries that harm the population instead of helping them etc.

Overall, it seems that we are paying for our own prison.

 

[SeekinTruth]

That sums it up very well, Courageous Inmate Sort. Thanks for starting the thread angelburst29. In quite a few places, the total taxes on cigarettes are in the range of 70 to 80% of the price. I remember buying cigarettes years ago at the duty free shop on the Canada-U.S. border and the price was around 70% cheaper. Even the average 58% taxes is outrageous.

 

[Mal7]

In New Zealand the tax on tobacco is a multiple of the cost of the tobacco, i.e. several hundred percent.

30g of rolling tobacco here costs the equivalent of US$29 / C$30.80 / Euros 21.30. The prices are continuing to go up by about 10% year, as part of a plan to have a Smokefree country (defined as less than 5% of the population still smoking) by 2025.

The cost of a pack of 20 tailormade cigarettes is about US$16.

Prime Minister John Key said yesterday that $100 a packet sounded like "an awful lot", and might serve only to encourage a black market.

Anti-tobacco charity Ash director Ben Youdan said that, although price increases were a powerful tool in reducing sales, a hike to $100 a packet might not be realistic.

"What is more realistic is getting cigarettes up to $30 or $40 a pack in 10 or 15 years' time and having a mix in other policies around that. If you are pushing prices up to $100 a pack I think it's pretty inevitable that people would see it as an opportunity to undermine that and see it as an opportunity to sell tobacco illegally."

- _http://www.stuff.co.nz/national/politics/6795216/100-for-cigarette-pack-dismissed

 

[Tomiro]

In the EU combined taxes on tobacco seem to be 70-90% of the retail price. Fuel tax seems to be in the same high range (50-60%), so it clearly brings in money.

Finland also have among the highest alcohol taxes, and there is an extra "sweet tax" of around 1 euro / kg, that is only applicable to certain products like candy, ice cream and soft drinks, but also to products containing cocoa for some reason. But sweets like cookies are exempt from the tax, so manufacturers can rebrand their product, like adding grains to the chocolate and calling it a cookie.

Luckily they haven't thought of taxing saturated fat yet, like they tried in Denmark.

 

[Courageous Inmate Sort]

A study from 2009 found these items to be the most taxed in Brazil:

1. Cachaça {distilled alcoholic beverage}: 81,87%

2. Mink fur coat: 81,86%

3. Cigarette: 80,42% {according to more recent data from WHO seems to have increased to around 99.5%}

4. Imported perfume: 78,43%

5. Caipirinha (cachaça+lemon+sugar): 76,66%

6. Video game consoles: 72,18%

7. Video game: 72,18%

8. National perfume: 69,13%

9. Motorcycle (above 250 cc): 64,65%

10. Fireworks: 61,56%

As for the global war on tobacco, it seems to go back to the World Bank's 1999 report Curbing the Epidemic: Governments and the Economics of Tobacco Control and the World Health Organization's Framework Convention on Tobacco Control. The Brazilian Law which outlawed smoking in just about any place covered by a roof that isn't your home makes explicit reference to the WHO convention.

You can see that tax measures are basically the first measure mentioned in both abstracts. The other measures imposed by many countries seem to be directly derived from the WHO "core demand reduction provisions", such as outlawing smoking under a roofed area as a means of "protection from exposure to tobacco smoke":

World Bank - Curbing the Epidemic: Governments and the Economics of Tobacco Control

Abstract

Besides the often asked questions on smokers ' health related risks, and cost-bearing of their consumption choices, the report examines basically, the economic questions that policymakers should address when contemplating tobacco control, and, explores options for governments, in light of justified intervention decisions. Following a careful analysis in the global trends of tobacco use, the report assesses the consequences of tobacco control for health, economies, and individuals. It further demonstrates how the economic fears, deterring policymakers from taking action, are largely unfounded: policies reducing tobacco demand, such as the increase in tobacco taxes, would not only, not cause long-term job losses, nor, would it reduce tax revenues, but rather, bring unprecedented health benefits without harming economies. Finally, an agenda for action is provided, on how to overcome the political barriers against change, with suggestions for research into the causes, consequences, and costs of smoking at national and regional levels. The report makes two recommendations: strategic action should be taken in a variety of aspects to curb the tobacco epidemic; and, international organizations should review existing programs/policies, to ensure due prominence in tobacco control.

WHO - Framework Convention on Tobacco Control

Overview

The WHO Framework Convention on Tobacco Control (WHO FCTC) is the first treaty negotiated under the auspices of the World Health Organization. The WHO FCTC is an evidence-based treaty that reaffirms the right of all people to the highest standard of health {it is so far from true that it's funny}. The WHO FCTC represents a paradigm shift in developing a regulatory strategy to address addictive substances; in contrast to previous drug control treaties, the WHO FCTC asserts the importance of demand reduction strategies as well as supply issues.

The WHO FCTC was developed in response to the globalization of the tobacco epidemic. The spread of the tobacco epidemic is facilitated through a variety of complex factors with cross-border effects, including trade liberalization and direct foreign investment. Other factors such as global marketing, transnational tobacco advertising, promotion and sponsorship, and the international movement of contraband and counterfeit cigarettes have also contributed to the explosive increase in tobacco use.

The core demand reduction provisions in the WHO FCTC are contained in articles 6-14:

• Price and tax measures to reduce the demand for tobacco, and

• Non-price measures to reduce the demand for tobacco, namely:

Protection from exposure to tobacco smoke;
Regulation of the contents of tobacco products;
Regulation of tobacco product disclosures;
Packaging and labelling of tobacco products;
Education, communication, training and public awareness;
Tobacco advertising, promotion and sponsorship; and,
Demand reduction measures concerning tobacco dependence and cessation.
The core supply reduction provisions in the WHO FCTC are contained in articles 15-17:

Illicit trade in tobacco products;
Sales to and by minors; and,
Provision of support for economically viable alternative activities.
The WHO FCTC opened for signature on 16 June to 22 June 2003 in Geneva, and thereafter at the United Nations Headquarters in New York, the Depositary of the treaty, from 30 June 2003 to 29 June 2004. The treaty, which is now closed for signature, has 168 Signatories, including the European Community, which makes it one of the most widely embraced treaties in UN history. Member States that have signed the Convention indicate that they will strive in good faith to ratify, accept, or approve it, and show political commitment not to undermine the objectives set out in it. Countries wishing to become a Party, but that did not sign the Convention by 29 June 2004, may do so by means of accession, which is a one-step process equivalent to ratification.

The Convention entered into force on 27 February 2005 - 90 days after it had been acceded to, ratified, accepted, or approved by 40 States.

This is truly global, almost 180 countries are participating:
_http://www.who.int/fctc/signatories_parties/en/index.html

Here you can see detailed reports made by each country to the WHO showing their compliance: _http://www.who.int/tobacco/surveillance/policy/country_profile/en/

The World Bank report can be downloaded here: _http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1759728/pdf/v008p00196.pdf
And the WHO Convention here: _http://www.who.int/fctc/text_download/en/