President Obama’s budget continues the Democratic preference for cigarette taxes over alcohol or soda taxes – even though alcohol and soda consumption may cost society more money than smoking.

In his budget, Mr. Obama calls for almost doubling the federal cigarette tax, to $1.95 per pack, up 94 cents from the current level. The tax increase would raise about $8 billion a year over the next decade and help pay for early childhood education.

Higher taxes on cigarettes reduce smoking rates, multiple studies have found. Lower smoking rates, of course, bring large benefits for society, by reducing early death and making people healthier. We’ll leave to others the debate over whether tobacco taxes today are too low, too high or just right.

But the Obama budget helps highlight how politically popular tobacco taxes are even though they may pack less of a fiscal punch than other sin taxes.

Why? Smokers tend to inflict damage mostly on themselves. The rise of no-smoking workplaces and restaurants means that secondhand smoke does less damage than it once did. And smokers die early, reducing their long-term use of Social Security, Medicare and other federal benefits.

Soda and alcohol are both a bit different. From some earlier reporting I did on alcohol:

Right now, the patchwork of alcohol taxes isn’t coming close to covering those costs — the costs of drunken-driving checkpoints, of hospital bills for alcohol-related accidents and child abuse, and of the economic loss caused by death and injury. [In 2006] some 17,000 Americans, or almost 50 a day, died in alcohol-related car accidents. An additional 65,000 people a year die from other accidents, assaults or illnesses in which alcohol plays a major role.

And yet alcohol taxes just keep falling, once inflation is taken into account:

Since the early 1990s, the federal tax on wine — $1.07 a gallon — hasn’t budged. The taxes on beer and liquor haven’t changed either, which means that, in inflation-adjusted terms, alcohol taxes have been steadily falling.

Each of the three taxes is now effectively 33 percent lower than it was in 1992. Since 1970, the federal beer tax has plummeted 63 percent. Many states taxes have also been falling.

Soda drinking does not inflict the same kind of damage that alcohol does, obviously. But soda is probably a bigger drain on taxpayers’ money than smoking. From an earlier Economix post:

… obesity appears to raise lifetime health care costs.

You find a lot of agreement among health economists on this point. “Unlike for smoking, lifetime costs are indeed positive,” Eric Finkelstein, an economist and health researcher at Duke, says. “The positive costs result because the mortality effect for obesity is much smaller than it is for smoking and the costs start much earlier in life.” Amitabh Chandra, a Harvard health economist, agrees: “Obesity is an important determinant of the rise in health care spending.”

Dana Goldman, an economist at the Schaeffer Center for Health Policy and Economics at the University of Southern California, has estimated that 3 percent of Medicare and Medicaid spending stems from the rise in obesity since 1978. And the link between obesity and soda – which has no nutritional benefit and whose consumption has soared over that time – may be stronger than the link between obesity and other any factor.

A recent bipartisan budget plan, from former Senator Pete Domenici, a New Mexico Republican, and Alice Rivlin, a Democrat and former budget director, called for a new federal soda tax. The soda industry, no surprise, opposes such a tax.

You can make an argument for or against all kinds of sin taxes. What I find striking is how popular one of them remains – even after sharp increases in recent decades – and how unpopular others remain.

A hat tip to Richard Yeselson, whose tweet on alcohol taxes this morning led to this post.

Article source: http://economix.blogs.nytimes.com/2013/04/10/obama-likes-some-sin-taxes-more-than-others/?partner=rss&emc=rss