Abstract
Consumption taxes are often used to dissuade citizens from purchasing products that cause negative health outcomes, such as tobacco and alcohol. Such taxes are often criticized on the grounds that they discriminate against the poor: Consumption taxes are ‘regressive’, insofar as they require poor persons to pay a larger fraction of their income per consumed unit of good. After an attempt to spell out exactly what this objection asserts, this chapter attempts to respond to it. The apparently egalitarian complaint about regressive taxation can be countered by other egalitarian worries about the vulnerability of low-income groups to the harms resulting from the type of consumption being taxed. This calls for the redesign of consumption taxes rather than abolition. Further progress can be made by recognizing there are ways of taxing consumption other than the standard model of a sales tax that is typically assumed in these debates. One is to hypothecate the revenues from ways that aid the poor, mitigating the regressivity of the tax burden. Another is to replace sales taxes with licences or permits. Hypothecation and licensing can also be combined in ways that can eliminate regressivity altogether. This contribution attempts to develop these ideas in more detail.
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- 1.
Taxing the consumption of some positional goods is recommended by Frank (2008). For more discussion, see the article by Xavier Landes in this volume.
- 2.
I should say, in passing, that I am not going to focus on the case for using consumption as a general tax base for raising revenue. This use of consumption tax does not aim to deter consumption of any specific product. At most, it is motivated by a concern to get consumers to spend less (and save more), largely irrespective of what kind of products they tend to spend their money on. Worries of the sort I discuss in this contribution can also be raised against views about consumption’s suitability as a general base, but call for a rather different response that must draw on whatever the reason is for preferring consumption as a general base. Proponents of the use of consumption tax as a general base can handle the regressivity objection by allowing the idea that consumers don’t pay any tax at all on a large initial portion of their annual consumption (this idea is analogous to the common practice of taxing income in ways that admit zero-percent bracket below a certain income floor). For discussion of this idea and defence of consumption as a general tax base, see McCaffery (2002). This proposal is of no help in the case of consumption taxes that aim to deter rather than raise revenue, since an exemption would simply remove whatever deterrent effect there is.
- 3.
The state’s moral duty to address problems of collective action at least goes beyond traditional problems of providing security and law enforcement. On this point see Goodin (1995).
- 4.
I should note that these authors are not arguing or claiming that regressive taxation is unfair, only that the opponents of regressive taxation are best understood as opposing it for this reason. The idea that a regressivity worries are grounded in fairness appears to be playing a role in McCaffery (2002) as well. Robert Goodin is careful to describe regressive consumption taxes as “undesirable” in ways that do not make an explicit commitment to their being unfair (1989, pp. 109–111).
- 5.
This is a general theme of Murphy and Nagel (2002).
- 6.
I have argued elsewhere for the more general claim that the morality of taxation is a rather fragmentary affair—see Halliday (2013).
- 7.
Some philosophers will interpret these remarks as indicative of a non-egalitarian concern, namely one focused only on the absolute levels of persons in ways that can be represented as a concern to give priority to the worse-off. I do not want to get drawn into the debate about exactly what is egalitarian and what is (merely?) prioritarian. Certainly, there is a robust formal distinction between methods of ranking material distributions according to the absolute value of the information about persons in them, and rankings that depend on relations between the information about such individual persons (e.g. inequality). This formal distinction is of some importance with respect to some pressing questions about distribution. But it is still possible to give an egalitarian motivation for using the first type of method even if the relevant welfare function is prioritarian. The short explanation is that welfare functions are formal tools that add precision to substantive informal claims about (say) the requirements of justice. Egalitarians have already made this claim elsewhere—see for example Cohen (2011, pp. 69–72).
- 8.
Paula Casal (2012) argues that higher consumption taxes should be paid by persons who use air travel on a frequent basis. Some countries, such as France and Great Britain, currently charge higher airport taxes for passengers departing in first or business class. (It is unclear to what extent these taxes are actually motivated by a goal of reducing environmental harm, since they are not levied on passengers who are merely entering or in transit.) For similar discussion see also Caney (2010).
- 9.
This observation was first made, I think, by Fred Hirsch (1977, p. 102). It is often true that collective action problems, when not properly addressed, do most damage to those already vulnerable. This is one reason to resist a misleadingly sharp separation between the requirements of egalitarian justice and those of ‘mere’ efficiency. These points are made in a compelling way by Iris Young (2011, Chaps. 2 and 6).
- 10.
This conclusion is drawn—with regard only to tobacco taxation in particular—by Goodin (1989, p. 110).
- 11.
For a report see “Tobacco and Poverty: A Vicious Circle” World Health Organization (2004), available at:http://www.who.int/tobacco/communications/events/wntd/2004/en/wntd2004_brochure_en.pdf (accessed 4/7/2013).
- 12.
Poor people often find themselves in certain institutional settings where they are monitored in ways that make the effects of harmful consumption harder to conceal and more likely to lead to costs. For example, a poor person’s alcoholism is more likely to incur costs if that person is already being monitored by employment agencies who can withhold benefits. More generally, patterns of stereotyping often play a role in what sort of character attributions are made in response to fixed data. For example, alcoholism in poor persons is relatively likely to be explained in terms of weak will and ill-discipline, whereas alcoholism in a wealthier person might more likely be attributed to blameless stress at work. Of course, part of the right response to these factors is to seek the removal of the status hierarchies that compound the disadvantage of poor people. Nevertheless, these points are compatible with the urgency of saving the poor from harmful consumption.
- 13.
There is, arguably, a sense in which one is burdened by being made to forego a purchase. Appeals to this sense of being burdened are less compelling to the extent that the foregone product is harmful. In addition, it is not obvious why the burden of foregoing a product must vary with the financial resources of whoever foregoes it, in the way that paying a consumption tax might be subject to such variation. It is often said that tobacco products provide a valuable resource for the poor on account of their role in relieving stress. This claim probably overlooks the likelihood that tobacco addiction raises base stress levels (see Halliday (forthcoming)).
- 14.
I should acknowledge that poor people often lack (e.g.) the transport options of wealthier people. So, it is possible that poor people are sometimes vulnerable to greater difficulties than rich people, as well as financial costs. However, insofar as this occurs, it is contingent in ways that the regressive distribution of a tax burden is not.
- 15.
This distinction is drawn by Cohen (2000, pp. 171–174).
- 16.
“A Fat Chance”, The Economist November 17th 2012: http://www.economist.com/news/europe/21566664-danish-government-rescinds-its-unwieldy-fat-tax-fat-chance (accessed Jan 12th 2013).
- 17.
Another method for dealing with supermarkets (which, in the UK, often sell alcohol as a ‘loss leader’) is to introduce a minimum pricing scheme (Ludbrook et al. (2012)).
- 18.
- 19.
- 20.
I would like to thank participants at the conference on Justice, Taxation and Social Policy, held at Salzburg University in August 2013. I am especially grateful to Xavier Landes for sending detailed comments on a later draft. A subsequent version of this chapter was also presented to an audience at the Centre for Applied Policy and Public Ethics (CAPPE) at Charles Sturt University in early 2014, and I thank those present there, too.
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Halliday, D. (2015). Egalitarianism and Consumption Tax. In: Gaisbauer, H., Schweiger, G., Sedmak, C. (eds) Philosophical Explorations of Justice and Taxation. Ius Gentium: Comparative Perspectives on Law and Justice, vol 40. Springer, Cham. https://doi.org/10.1007/978-3-319-13458-1_8
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