A tax for all seasons
By John D. Turner
15 May 2009

"The power to tax is the power to destroy” – Daniel Webster, John Marshall; McCulloch v. Maryland

It has been said that California is a trendsetter. Whatever happens in California eventually happens across the entire nation. And in this age of soaring federal budget deficits and ever increasing spending, the federal government now seems to be taking a page from California, the state that has never found an item that it is unwilling to tax, as it searches for more and more revenue to fund a budget that is not slowly, but rapidly spinning out of control.

Remember that “free” health care that the president has promised us? Well, as congress has found, “free” health care is actually pretty expensive. Someone has to pay the bill. Early estimates put the cost of this first installment of the government health care plan at around $1.2 trillion. Of that, we have currently borrowed only half.

So how does one go about paying for “free” health care? Without raising taxes, except on those nasty greedy rich folks who are always fair game?

Well, there are always “sin taxes”.

Sin taxes are great. These are taxes on things that we all agree are bad, usually levied to support something that we all agree is good. Examples include smoking and drinking alcohol, the taxes on which go, among other things, to support children’s health care.

Most everyone agrees that smoking is bad, even people who actually smoke. Increasing taxes on a pack of cigarettes causes hardly a ripple of protest. Oh sure, smokers grumble, but they are an increasingly small minority of people in our country, and people who don’t smoke really don’t care. I don’t smoke, and as far as I am concerned, they could raise the tax to $10/pack and I wouldn’t lose any sleep over it.

And it’s a voluntary tax. You don’t have to pay it unless you smoke. You can avoid the tax completely by giving up the habit if you are a smoker, or better yet, by never starting in the first place. I know that quitting is difficult; that’s the nature of addictions after all. But it is not impossible, as can be attested to by the many people who do quit every year. And if you feel that you can’t quit, or you simply don’t want to, you can feel proud of your habit by pointing out that you are helping to fund health care for children much in the same way as those who play the lottery justify it by pointing out that they are supporting public education.

The government claims that the purpose of the high cigarette taxes is to encourage people to stop smoking. Personally, I doubt that. After all, if people quit smoking, where would they get the money to fund children’s health care? They really don’t want you to quit; they just want you to pay the taxes.

Hold that thought.

This week, the Senate Finance Committee met to hear proposals from experts on how the new comprehensive health care plan President Obama has promised will actually be paid for. It’s going to be expensive, and while it may be “free”, someone has to pay. Here is one of the proposals up for review.

The Center for Science in the Public Interest has a plan to impose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks, and ready-to-drink teas. As Mr. Michael Jacobson, the executive director for the group put it, “Soda is clearly one of the most harmful products in the food supply, and it’s something government should discourage the consumption of.”

Ah ha! Harmful, dangerous even, according to some. And with the growth of obesity, diabetes, and other ailments linked to sugar consumption increasing in our population, this is clearly something that will impact healthcare in the future. A perfect candidate for a new “sin tax!”

There’s only one problem. I have read the Constitution of the United States, the blueprint by which our government is supposed to operate, and nowhere within do I find any mention whereby the government has the authority to determine what I as an individual should or shouldn’t do, or the authority to enforce that determination via the tax code or any other means.

It simply isn’t their job, nor is such oversight, however much one might feel it to be in the public interest, in their purview.

Not that that matters much now days. The constitution, what’s that? Some moldy old document penned hundreds of years ago by some dead white guys? Never let the constitution stand in the way of a good law that is needed for the good of the people! Anyway, it’s a “living, breathing document”, isn’t it? Means whatever we want it to say whenever we want it to say what we want. That’s what progressives think anyhow.

So having lain to rest the argument that they can’t tax us anyway (they will anyhow), what’s an excise tax anyway? How does that work and why do I care?

An excise tax is levied on goods; it is not a tax that the consumer pays at the cash register. So it’s a tax that the government could levy and still tell us, with a straight face, that they have not raised our taxes. Technically they would be correct. However, when you go to buy the product at the store, it will cost more, as the business will simply pass that additional cost of doing business along to us, the consumers. It’s the same as if the cost of labor, sugar, water, or any other ingredient in the drink increased.

Whereas the federal government can spend money it does not have and stay in “business”, actual businesses cannot do so without ultimately going bankrupt and shutting down. Shutting down means people out of work, less tax revenue to the government (you can’t pay taxes on what you don’t make), and of course, you lose by no longer being able to purchase that product.

And how much would this tax raise exactly?

Well, it all depends on how much tax the government levies. And of course, how much product is produced. The Congressional Budget Office estimates that if a three cent tax were levied on each 12-ounce serving of such drinks, it would generate $24 billion over the next four years. Such a tax would most likely raise the cost of such products a nickel, at least in vending machines. I don’t think I have ever seen a vending machine that takes pennies.

Thus, holding everything constant, we could expect that a 12-pack of Dr. Pepper for example, would cost an additional 36 cents in added taxes; certainly not an outrageous sum, but you know how it goes; 36 cents here, 36 cents there, and the next thing you know, we’re talking about real money.

But are we talking about real money? $24 billion certainly sounds like real money. But when compared against $1.2 trillion, $24 billion could get lost in the waste you would expect something that large to generate. Of course, that $1.2 trillion is an estimated cost over 10 years. Projecting that tax across 10 years instead of 4, we get $60 billion. Not much of an improvement; still a drop in the bucket.

Keep in mind too that the $1.2 trillion figure is an estimate. One thing that is fairly constant with government estimates; they are generally wrong. And generally they are low. Things typically cost much more than the government originally estimates them to cost. They are trying to sell you something, remember? A good example of this is the so-called “Big Dig” transportation project in Boston, which was originally projected to cost $2.6 billion, and ended up costing $7.78 billion, almost three times the original estimate. If the same holds true for our “free” health care plan, the cost over 10 years would rise to a staggering $3.6 trillion.

Now granted, half of that cost increase has been attributed to inflation. However, does anyone seriously believe that inflation will be zero over the next 10 years? If you do, you believe in something that never was and never will be. With spending the way it is now, it is more likely that inflation will be significantly higher than it is currently, rather than lower. Maybe $3.6 trillion isn’t such an outlandish number after all.

Still, a bucket of water consists of many many individual drops. A drop here, a drop there, and the next thing you know your bucket is full. So just because a three cent tax on soda and related products would not pay the entire amount does not mean that the tax should not be levied. It just means you will need more taxes. And there are plenty of things in the same vein that are just crying out to be taxed, for exactly the same reasons.

How about potato chips? Eating too many can lead to obesity. And the fats and salt in them aren't too healthy for you either. Ditto all the related products such as Doritos, Cheetos, and anything else of that ilk. We could add a small tax to those. How about three cents per 6 oz of product?

Then there’s fast food. Burger King, McDonalds, Wendy’s, etc. Long John Silver’s. Pizza Hut. The list goes on. We all know that fast food is bad for us. All those fats, grease, salt, calories, you name it. Surely there is some kind of an excise tax we could levy on those.

How about transfats? Butter? Lard? Candy? There are all kinds of thing that we eat that can cause health problems down the line and lend themselves to taxation as a result.

How about behavior? Skydiving is risky. If you get injured skydiving (or mountain climbing, or bungee jumping, or even playing soccer), should I the taxpayer pick up the tab for your treatment? Or should you perhaps pay an extra tax of some sort to pay for the risk that your risky behavior presents to the national health care system? Maybe an excise tax on sports equipment, or some other hidden tax to help poor Uncle pay the bills.

If you were speeding and got into an accident, should I the taxpayer treat that as an acceptable risk? Just driving a motor vehicle is risky. What if you get into any kind of an accident? What if you are talking on your cell phone and not paying attention, or even worse, texting, and are injured in an automobile accident as a result? Maybe there should be an excise tax put on cell phones (or cell phone use) to cover that as well.

Sound crazy? What if you are a responsible cell phone user who would never even think of talking on one or texting while you were driving? Why should you pay a penalty in tax because some people are irresponsible?

Well, why should I pay a tax on soda just because some people who drink it are fat, if I am not fat? Where is the justice in that?

The bottom line is that if you take the government’s coin, you play by the government’s rules. Everywhere there is government money involved, there is government regulation, government intrusion, and government oversight. The government is famous for using federal funding of one sort or the other as an instrument of extortion to get whatever entity is on the take to do what it wants.

Those of us who are old enough, remember the national 55 mph speed limit which stayed in place from 1974 to 1995. Originally enacted as part of the Emergency Highway Energy Conservation Act, it was put into place in response to the 1973 oil crisis. Once the crisis was over, many of the states wanted to set their speed limits back to what they were before, only to be told by the federal government that if they did so, the feds would cut off their federal highway funding.

A more recent example would be the response the feds gave to California regarding the stimulus money they were supposed to receive. Instead, they have been told that if they do not restore the $74 million in wage cuts for union workers they cut from their state budget, then they will lose the $6.8 billion in federal stimulus funds slated to go to California.

The government will justify its intrusion into your life, what you eat, what you do, based on the fact that they are picking up the tab. (Even though they are doing it with your money.) They will do this regardless of whether or not they are empowered by the Constitution to do so (they are not), or whether or not you want them to do so (I certainly do not – you might disagree.) The only way to keep them from getting into your knickers is to not let them anywhere near your body in the first place.

And that means out of the health care business all together.

The proposed tax on soda is just the start, the proverbial camel’s nose under the tent. It won’t take long before the entire camel is inside. And once a camel is in your tent, there really isn’t much room for you or anything else.