“Taxes are the price we pay for a civilized society” – Oliver Wendell Holmes, Jr.
And in a modern society there are many different forms of taxation, each with their own rationale and purpose. While it would be impractical to address all the concerns with taxation, one that stands out is excise taxation of items deemed harmful to society.
The claim is that this tax is levied to pay for the damage caused to society as well as used as a way to raise prices in an effort to reduce use. Examples of items which are often subject to this kind of excise tax are alcohol, tobacco, gambling, and sugary foods. The usage of this tax as a cost recuperation and economic disincentive mechanism is quite controversial as it is a very visible form of taxation.
Much of the discussion around these kinds of taxes tends to focus on a more macroscopic look at whether the government should even levy these kinds of taxes. While this is definitely an important topic for discussion, the reality is that with how prolific and profitable these kinds of tax are, they are unlikely to disappear any time soon. The pragmatic approach should instead be looking at how best to utilize this tax mechanism for good by putting the revenue to good use.
Careful consideration has to be paid to where the tax revenue is going with the government having the ability to make rules about the level and target of taxation. In the case of these excise taxes designed to pay for the damage caused to society, the revenue needs to go towards something that directly solves that.
This first step towards this goal is not having the revenue them these excise taxes go towards paying the salary of people who have the ability to make the tax in the first place. Levying an excise tax intended to repair damage to society is not accomplished in the pockets of lawmakers. One way to accomplish this would be to remove the excise tax revenue from the general government tax revenue “pot” so that it would avoid possibly going towards paying people who proposed the tax. To avoid the conflict of interest with who created and benefits from the tax, and to solidify the public’s faith in the purpose of this tax, revenue from these kinds of taxes need to be separated from the general revenue pool and be directed solely towards prevention and treatment of the problem that tax claims to be helping to combat.
This can be accomplished through the funding of public programs which help with prevention as well as deal with the damage caused by the consumption of these goods. This could include, but is not limited to funding for hospitals, diabetes programs, cancer treatment and research, or rehabilitation and treatment from alcoholism.
This separation and segregation of tax revenue and their intended uses is not exclusive to the kinds of taxes being discussed here. This solution can, in a more general sense, be applied to many aspects of the collection and distribution of tax revenue.
The core reasoning behind excise taxes is that they are intended to help dissuade the use of, and pay for the repercussions of, the consumption to things deemed harmful. In order for this reason to hold any weight removing this revenue from being generally accessible in the budget goes a long way to proving the governments honest intentions for the tax as a social benefit and not a revenue generator.