Monday, April 9, 2012

Scaled to Proportion

Pigouvian taxes are nothing new, and probably one of the most controversial taxes out there. In theory they sound nice…utopian even. Yet, there are people on both sides meaning that the reality is much more complex than Frank portrays in Chapter 11.
  A tax on harmful activities must have some type of clear objective if, as Frank proposes, this type of tax is to raise revenue AND help halt negative externalities. Wouldn’t at some point individuals either find ways of going around the tax or just quitting the harmful activity all together? This outcome might be nice if it was something like air pollution given that the city still had means of gaining electricity etc., but if harmful activities are taxed because they’re harmful…eventually won’t tax revenue significantly decline?

  I suppose it seems kind of obvious, but income taxes have probably been around so long because not matter how much technological and societal change may occur…one thing seems to remain relatively constant: people desire to make a stable income. It's become a necessity. With this in mind, I would be skeptical as to how this type of tax may accomplish a goal without further information as to how it is expected to function since uncertainty is bound to arise. Therefore, I wouldn’t get my hopes up on a sin tax making any significant dent in the national deficit or raising much additional revenue any time soon.

 No one doubts that social engineering exists. In fact, Frank has seemed to base his book off of the idea that society, with the right elements in place, can be coerced in one direction or the other. But again, the same age old argument comes up. Does society really need coercing? I believe Frank would answer that question by saying, “Yes, because society often chooses negative benefits over the more optimal choice, which means they must be coerced in a specific direction if they are to make the best decision for all.” At what point is the best decision the most optimal outcome? At some point, society as a whole will have to learn from their own mistakes; after all it’s not always about reaching a level of perfection but about being aware so that the most optimal outcome may be reached.

 Interestingly enough, I had a conversation with a friend about cigarette taxes a couple weeks ago. She explained to me that she has a research internship over the summer on the “Psychological Effects of Cigarette Taxes” which is actually quite fascinating and relevant for this specific chapter. Apparently, recent evidence has suggested that many individuals buy more cigarettes in larger quantities because they feel pressured by the uncertainty of whether cigarette taxes will increase so they “stock up.” Since some use nicotine for its calming effects, the idea of not having a cigarette is extremely stressful, leaving some to smoke more cigarettes more often making the problem for some, worse.

 Then again, one could argue that smokers pay their debt to society because smoking is, after all, an expensive habit, but if it’s about making sure “the good of the collective is met” as Frank has seemed to base his book off of, others won’t stop… and the problem will only increase as time goes on. Likewise, just because cocaine is illegal doesn’t mean people will stop using it. A tax or a ban may force others to reconsider or just pressure others to find alternative ways to engage in that harmful behavior whether it is detrimental to that individual’s wellbeing or not.

 I understand why Frank wants to tax such environmental issues as air pollution, but his argument on wearing a helmet seems extreme to say the least. Humans are social creatures and therefore are apt to be influenced in some way both emotionally or physically by the actions of others. A sin tax tends to focus on the physical harms which are uncured by others because those effects are generally more measureable, but emotional pain is difficult to quantitatively measure, making a tax on indirect harm seem extraneous. Frank argues from a social standpoint using examples to convince his audience that taxes on indirect harm alleviate pressure on those who want to adopt safety measures yet choose not to maintain social appearances. Either way, it is their choice, and forcing individuals one way or the other, seems to be the equivalent of attempting to compensate against pain itself.

 Personally, I stand somewhere in the middle. Environmental issues will have to dealt with at some point, and a tax be the best solution. Pollution is a problem, and while such technological advances as hybrid cars and solar panels have been developed for the purpose of lowering our carbon footprint, it is up to us to take necessary action in ensuring that our world is not decimated by carelessness. On the other hand, that doesn’t mean I think everyone should be taxed on bubblegum because there is the likelihood of it getting stuck to your shoe or being stuck to the underside of a desk. What I do think though is that the solution should be scaled to the proper proportions, considering the range and magnitude of individuals affected so that treasured individuality may not be sacrificed for the sake of an issues which must be resolved anyway.

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