Saturday, January 02, 2010

The taxes of sin...

In what could be a test analog for a carbon (Pigou) tax, the Russian government is slapping heavy new taxes on vodka.
Minimum prices for vodka have been introduced as part of President Medvedev’s campaign to combat alcoholism at a time when Russians traditionally drink heavily.
The price of the cheapest half-litre vodka bottle will nearly double to a minimum of 89 roubles (£1.82). Shops in Moscow carry a wide selection of vodka, with luxury brands priced at more than ten times the new minimum. Elsewhere, the cheapest vodka can be bought for 51 roubles.
The lengthy new year and Orthodox Christmas holidays in Russia, which last from January 1 to 11, are traditionally marked by increased alcohol consumption. The bottles in the form of Russian traditional Matryoshka dolls are part of a museum illustrating the development of the drink since the 15th century.
Successive Soviet and Russian leaders have tried to reduce the country’s drinking habit. In August, Mr Medvedev ordered tough measures to curb alcohol abuse after official figures showed that the average Russian drank 18 litres of pure alcohol each year. Since then the duty on beer has been tripled.
Mikhail Gorbachev, the last Soviet leader, declared a war on alcohol abuse in 1985, ordering dramatic cuts in the production of wines and spirits and introducing strict controls on public consumption. It led to a surge in illegal production of low-quality, home-brewed drink and damaged Mr Gorbachev’s popularity. [Apologies for a complete excerpt]

I don't think the current Russian administration is quite as worried about popularity as Gorbachev should have been.  But the pattern merging from tobacco, seat belts, and now liquor is to point to evidence of rising health care costs and consequences to enact taxes designed to change behavior in areas often considered moral ground.

To be sure, the Russian alcohol problem is long-standing and severe. I remember reading Hedrick Smith's The Russians, in which he learned the savage lesson of what is was like to drink with Russians.  Also the crippling agony of a vodka hangover, although research suggests this impression may be simply due to the staggering amounts Russians drink, rather than the actual form.

Regardless, I wonder if this will also turn out to be a significant revenue source for the government. 

At the same time, even Brits, whose imbibing habits over-matched a certain young ensign back in the day, are taking notice of the medical aftermath.
According to a recent report by the NHS Confederation and Royal College of Physicians, a mammoth share of NHS’ cost for injuries and illness goes to the Britain’s binge-drinking ‘epidemic’, which sucks a whopping £2.7 billion every year.
The rather disquieting report has clearly revealed that the country’s heavy drinking culture is putting “unsustainable burden” on the healthcare system, with the staggering cost of rampant boozing treatment having increased more than twofold as compared to the five-year back figures.
The report further added that the escalating levels of heavy drinking are responsible for creating a crisis that might spell a substantial increase in related diseases in the coming ten-year period. [More]

 One aspect of this is certainly the major health issue involved, but what I find interesting is the growing tendency to tax rather than forbid. This is my preference for tackling our marijuana issue, as well.

It's crossed the mind of a few CA politicians, as well.
A California state assemblyman from San Francisco has introduced legislation that would legalise and tax marijuana, a move he hopes will help shore up the state's dire finances.
The bill by San Francisco representative Tom Ammiano, would legalise the cultivation, possession and sale of marijuana by people 21 and older. It would charge growers and wholesalers a $5,000 (£3,400) initial franchise fee and a $2,500 annual renewal fee, and would levy a $50 per ounce fee on retailers.
The law, which would make California the first state to legalise marijuana, would inject an estimated $13bn a year in revenue into California's empty coffers. Governor Arnold Schwarzenegger on Friday signed a $130bn budget that raises sales and income taxes, and dramatically slashes spending. States across the country are facing massive revenue shortfalls, as income and real estate tax receipts fall and outlays for unemployment insurance and health coverage rise.
"It is simply nonsensical that California's largest agricultural industry is completely unregulated and untaxed," Marijuana Policy Project California policy director Aaron Smith said at a news conference announcing the bill. "With our state in an ongoing fiscal crisis — and no one believes the new budget is the end of California's financial woes — it's time to bring this major piece of our economy into the light of day." [More]

I think there is evidence to suggest such policies actually do curb such activities - smoking rates have dropped, for example (at least until tobacco companies lowered prices to change the economics). Moreover, the uncertain results of the enormously expensive "war on drugs", especially the disproportionate amount of resources aimed at pot smokers does not offer much health care cost justification.

As health care cost impact becomes more a factor for all kinds of policy decisions (undoubtedly more will be coming on meat and fat consumption, for two examples), a slow sea change to taxation instead of enforcement could be good for public budgets and personal liberty.

No comments: