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Comment by drjesusphd | Hacker News Reader

This is a great idea. The point of a tax is to impose penalties that exist in real life, but are not part of the original transaction: externalities. Widespread use of antibiotics has a cost associated with it that must be paid by someone, and it should be part of the price of antibiotics.

Much like there's a cost associated with income inequality, so we tax the rich more to supposedly cover that cost. Costs associate with pollution, greenhouse gases, moral hazard, etc. are all risks and costs that must be mitigated at the transaction level, otherwise the market fails.

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sorry, generally speaking the point of a taxes is NOT to cover externalities, it is to control the populace and to fill the coffers of the state. Exactly what externalities do cigarette taxes cover? International trade duties?

Taxes generally fail in the pursuit of correcting externalities because taxes are set by policy and committees are notoriously bad at pricing. The generally better way to cover externalities is by propertization (so a carbon AUCTION - and not cap-and-trade which has all sorts of politically motivated loopholes and subsidies - would be smarter than a carbon TAX). Furthermore there are plenty of activities that incur externalities (such as homelessness) which we probably shouldn't be taxing.

An even better way to correct externalities is to stop making them externalities through social action - get people to value things like companies that destroy the environment less. It's hard work, but you just have to not be lazy in your social action.

I agree with your overall point. However, the implicit claim that there are no externalities to cigarette smoking is silly. There are clearly effects on everyone who might be nearby when you're smoking.

In the event that you're covered by any sort of public health insurance, which is nearly certain in old age with Medicare and increasingly probable at younger ages, then the effects on your own health become a problem for everyone else.

>In the event that you're covered by any sort of public health insurance ... then the effects on your own health become a problem for everyone else.

A vile argument. The idea that the state is empowered to curtail people's personal activities simply because the state chose to subsidize the personal health care costs of those activities should be anathema in a free and civilized society.

Once we've chosen to subsidize health care, then everyone has a financial interest in everyone else's behavior. I agree that it's a vile situation, but I tend to think it's a reason to avoid government-subsidized health care in the first place. Once we've got it, ignoring the financial consequences is just stupid.

This cuts both ways, though — with private insurance, insurers have a financial interest in focusing on current rather than lifetime expenditures, leading to both subpar outcomes in general and overestimation of costs related to lifespan-shortening behaviors like smoking.

With that said, high taxes on tobacco products in particular are primarily seen (by proponents and detractors) as means to reduce smoking for general, not exclusively economic, public health reasons.

But at least with private insurance it's a voluntary contract between you and the company, and not a forced one between you and every other taxpayer in the country. While other members of your insurance group have a financial interest in your behavior, the government and the rest of the taxpayers don't.

Tobacco taxes are certainly justified in many different ways, but public health is one of those ways. I'm also reminded of the big settlement the tobacco companies had to pay to all the states about 10-15 years ago, which was justified by the extra expense imposed on Medicare/Medicaid. That wasn't a tax, though it was functionally similar.

You live in a democracy, so replace "the state" with "the people".

Actually, it turns out smokers cost the public health insurance system less, on average, than non-smokers do.

If anyone actually believed the argument we should tax smokers because of externalities, upon hearing this fact they would immediately say "we should tax non-smokers!"

Evidence, please? I understood the opposite: even if they live for a shorter time, smokers tend to have more costly chronic illnesses.

>There are clearly effects on everyone who might be nearby when you're smoking.

I don't think this is true. It only applies when indoors and probably for a very long period of time (ie living with the person, not just being at a restaurant.) Furthermore you can ban public smoking indoors as many places do, that's not the same as a tax.

>In the event that you're covered by any sort of public health insurance, which is nearly certain in old age with Medicare and increasingly probable at younger ages, then the effects on your own health become a problem for everyone else.

This is a problem with public healthcare, not smoking.

Certainly the duration and density of secondhand smoke matters, but I doubt that any amount of it is good. I can go dig up the research if you really care.

To your particular example of being in a restaurant, the increasingly-popular ban on smoking in bars and restaurants was largely driven by the negative health effects on the staff. Though again, I believe the effects on other patrons were non-zero.

>>This is a problem with public healthcare, not smoking. We're agreed there. But getting rid of the public healthcare doesn't seem to be a realistic option at this point.

> Much like there's a cost associated with income inequality, so we tax the rich more to supposedly cover that cost.

That's a fairly disturbing way to frame progressive taxation. In the other examples of taxing externalities, we intentionally discourage the behavior by taxing it. Do you intend to discourage people from becoming rich by taxing it? Also, it takes both rich and poor to have inequality. Why not tax poor people more to discourage poverty?

There are some economic/social theories that suggest homelessness is an adequate and necessary deterrent to poverty.

However, I'm not going to address a flaw in your logic, namely that the only role of taxation is deterring undesirable behavior.

>There are some economic/social theories that suggest homelessness is an adequate and necessary deterrent to poverty.

Is the implication here that if homeless didn't exist, it would actually be ok to tax/punish poverty? Otherwise why even bring that up?

> Do you intend to discourage people from becoming rich by taxing it?

That's not the intention, but perhaps a side-effect. A minor one, at that. I'd imagine it would be very difficult to discourage people from becoming rich. A progressive tax schedule certainly does not do much discouraging right now.

Now that I answered your question, perhaps you can return the courtesy:

Does there or does there not exist a high enough degree of income inequality such that there is a cost borne by society?

Progressive taxation? That's a good joke.

In what countries that have 'progressive taxation' do the rich actually pay a higher percentage of tax on all sources of income / wealth?

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