Sue Frantz

Sin tax as punishment. Or not. An operant conditioning example

Blog Post created by Sue Frantz on Feb 13, 2019

If you want an entire country, state, province, territory, or city to stop ingesting certain consumables, you tax them. “Sin taxes” are applied to things like alcohol and cigarettes. The goal is to make these goods so expensive to purchase, people will stop purchasing them. Or, for those who continue to consume them, the tax they pay can go toward the public health coffers.

 

The U.S. federal government, for example, has a tax of about $1.01 on each pack of cigarettes (Alcohol and Tobacco Tax and Trade Bureau, 2017). Each U.S. state/territory can add their own tax on top of that. The national average is $1.79/pack with a low of $.17 (Missouri) and a high of $5.10 (Puerto Rico) (Boonn, 2018). Finally, cities can add their own taxes. New York City, for example, adds a $1.50 tax. If you want to buy a pack of cigarettes in New York City, you’re tax is $1.01 (federal) plus $4.35 (state) plus $1.50 (city) for a total of $6.86 (Mathias, 2017). And, then, of course, is the cost of the cigarettes themselves.

 

Do sin taxes work? Does this added cost reduce consumption of tobacco?

 

Using a list of tobacco taxes in the U.S. (Boonn, 2018) and a list of smoking rates in the U.S. (Centers for Disease Control and Prevention, 2018), I ran the correlation: -.42. The higher the tax, the lower the smoking rates. Of course, correlation does not mean causation. Do higher taxes cause people to smoke less? Or is it the other way around? Are people in states where people smoke less more likely to vote for higher taxes on cigarettes? Or is there some third variable(s) that affect both the cigarette tax and the smoking rate?

 

It doesn’t answer the question of causation, but the World Health Organization reported on interesting longitudinal data from South Africa (WHO report on the global tobacco epidemic, 2008). When the tax was high, cigarette purchasing was low. From the mid-1980s through the late 1990s, South Africa reduced the tax, and gradually the cigarette purchasing rates climbed. In the late 1990s when they started raising the tax again, cigarette purchasing rates declined again.

 

If “sin taxes” cause us to reduce our purchasing of “sin” products, then operant conditioning offers an explanation why. If a product costs a lot of money to purchase, we’ll be less likely to purchase it – especially if we are not financially well-off. Punishment is defined as anything that reduces a behavior. High prices are, well, punitive. Or at least that’s the idea. For a six tax to be punitive, the amount of additional tax has to be enough for us to actually reduce the behavior, i.e. stop purchasing the product. What that amount is for you may be different than what it is for me. For a 1-pack-a-day smoker in New York City, they’re paying $6.86 in tax alone for that pack of cigarettes. If they make $14.00 an hour, one half hour of work goes toward that cigarette tax. Every day. I wouldn’t be surprised if that smoker quite smoking, or at least reduced how much they smoke. For a different 1-pack-a-day smoker who makes $150 an hour, that $6.86 in tax doesn’t hurt so much. They can make that amount of money in less than 3 minutes. Every day.

 

This is the discussion in Seattle right now around a year-old sugary drink tax. In the city, each sugary drink is assessed a $.0175 per ounce tax. That 16 ounce Coke you are buying with your lunch is now $0.28 more. “The city predicted the tax would cut soda consumption by 40 percent. But through the first nine months, the tax is generating revenues at a rate 52 percent higher than predicted — suggesting it’s possible it may be having no effect on Seattleites’ soda appetites whatsoever.” One possibility is that most of the city residents are making enough money that that $0.28 isn’t even felt (Westneat, 2018).  Like the rest of the city, that $0.28 is not going to stand between me and my Coke.*

 

Here’s a quick classroom demonstration. Ask students to think about their favorite beverage. How much more would their drink have to cost for them to reduce how much they buy? Start at $0.25 and raise it by $0.10, then another $0.10, and so on. Ask students to raise their hands when the additional cost hits the point when they buy less of it and to keep their hands up until everyone has their hands in the air (or use clickers – “vote A when we hit your no-go tax.”)

 

Reiterate that punishment is only punishment if it reduces the behavior. What that punishment point is differs by person.

 

The other thing that punishment does is make us good at avoiding punishment. You shouldn’t be surprised to hear that there is a thriving black market for cigarettes in New York City. Of these smuggled packs of cigarettes, 30.9% have no state stamp; 44.7% carry a Virginia stamp where the state tax is $0.30 per pack, well-below the New York State/New York City combined tax of $5.85 (Mathias, 2017). If the tax is too high, people will find ways to not pay it.

 

Conclude this part of your lecture by emphasizing the importance of understanding the principles of operant conditioning. From their pets to their dating partners/spouses to their children to the population of a city, state/province/territory, or country, operant conditioning is at work.

 

*Actually, I haven’t had a full-sugar Coke in years, but if they similarly taxed Diet Coke or Coke Zero, I’d have no problem paying that $0.28. Don’t tell the Seattle City Council.

 

References

 

Alcohol and Tobacco Tax and Trade Bureau. (2017). Federal excise tax increase and related provisions. Retrieved February 3, 2019, from https://www.ttb.gov/main_pages/schip-summary.shtml

 

Boonn, A. (2018). State cigarette excise tax rates and rankings. Washington, D.C. Retrieved from https://www.tobaccofreekids.org/assets/factsheets/0097.pdf

 

Centers for Disease Control and Prevention. (2018). Map of cigarette use among adults. Retrieved February 3, 2019, from https://www.cdc.gov/statesystem/cigaretteuseadult.html

 

Mathias, C. (2017). Inside New York City’s dangerous, multimillion-dollar cigarette black market. Retrieved February 3, 2019, from https://www.huffingtonpost.com/2014/04/03/cigarette-smuggling-new-york-_n_5041823.html

 

Westneat, D. (2018). The city’s new soda tax is usurious — and also too low. Retrieved February 3, 2019, from https://www.seattletimes.com/seattle-news/politics/story-of-seattle-the-citys-new-soda-tax-is-usurious-and-also-too-low/

 

WHO report on the global tobacco epidemic. (2008). Geneva, Switzerland.

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