Sin Taxes and Biomarkers
For years, ‘sin taxes’ – taxes on socially undesirable and/or addictive substances/activities like smoking, alcohol and gambling – have been a source of controversy. On the one hand, they have been seen as an effective means to raise revenue and reduce consumption of addictive (and generally unhealthy) substances. On the other hand, sin taxes are generally regressive and are rather paternalistic. But beyond these typical disputes, recent research has found a new and important dimension to the sin tax debate: genetics. A study by Jason Fletcher has found that whether or not taxes reduce cigarette consumption depends on the presence of a particular genotype. This suggests an interesting and novel policy: only apply the cigarette tax to those whose genotype indicates they will respond to the tax. But is this a sound policy, or should we be keeping biomarkers out of policy debates over sin taxes?
Fletcher’s study is relatively novel insofar as it correlated a particular biomarker with response to taxation. The relevant biomarker is a variant on the CHRNA6 gene, in the rs2304297 SNP. This polymorphism plays a significant role in nicotine receptors. Those with the G/G variant (51% of the population) are less likely to be addicted to nicotine compared to those with G/C or C/C variants (the remaining 49%), likely due to differential reward effects from nicotine exposure (which fits nicely into the strong-appetite conception of addiction). And, moreover, Fletcher found that only those with the G/G variant reduced cigarette consumption in the face of higher cigarette taxes. This effect makes perfect sense; those who have stronger addictions and get more pleasure out of cigarettes would be more likely to find cigarettes worth the expense, even at higher prices. Fletcher’s study has some significant limitations – it is based on data from the early 90s and relies on US state-level taxation from that period – but if it can be replicated there are some fascinating policy implications.
Here, I will focus on the biomarker-sensitive tax policy suggested above. The idea would be to only apply the cigarette tax to those with the G/G variant of CHRNA6. Those with the G/C and C/C variants, after all, would not reduce consumption of cigarettes based on the taxes. If the goal of the sin tax is indeed to reduce consumption of cigarettes (due to their unhealthiness), we should only apply the tax to whom it would be an effective disincentive. Otherwise, those with the G/C and C/C variants would receive increased cost of cigarettes without any compensatory benefit (necessary for any paternalistic intervention or costly public health program). Implementation of this policy would be tricky, but perhaps the easiest method would be an opt-in testing service: special tax-exemption cards (perhaps with photo ID, registered to a central database) can be issued to those who undergo a genetic test and have either the G/C or C/C variant. Because alteration of one’s own genes is not (yet) possible, the obvious perverse incentive to induce the addiction-prone G/C or C/C variants is not relevant – though the policy would likely have to be repealed once such alteration became widely available.
However, the above policy is only defensible if paternalistic disincentive (reducing cigarette consumption by forcing people to pay more for cigarettes) is crucial to one’s justification for sin taxes. Beyond the question of whether such paternalistic measures are generally justified, there are alternative justifications for sin taxes that would militate against the biomarker-sensitive tax policy. These justifications are essentially revenue-gathering. On this line of thinking, we tax cigarettes not (primarily) because that will reduce consumption, but to generate revenue for various social programs. If that is the case, we would want to tax people whether or not their genes predispose them to reduce consumption based on taxes.
Two avenues might be used to further justify using sin taxes (which are problematically regressive) as a means to raise revenue and thus ignore biomarkers: domain-specificity and responsibility. The domain-specificity argument is relatively narrow. Often times, the products and/or behavior subject to sin taxes pose significant social externalities – in the case of smoking, increased health care costs often born by society at large. To pay for the mitigation of those costs (esp. through universal health care, rather than smoking-sensitive private health insurance), it makes sense to tax those smokers who are generating the costs. But sin taxes are rarely that domain-specific, and so usually rely on an additional notion of responsibility. The idea is that a) certain behaviors such as smoking are bad (both for the individual and society) and b) people are personally responsible for engaging in those behaviors. We can justify the regressive sin taxes, then, because it simply increases the costs of bad behaviors that people freely choose to engage in. This line of thought is rather tricky, as it comes close to passing moral judgment on smokers, drinkers, gamblers, etc. (this argument implies they ‘deserve’ to pay more because they are acting badly) and must deny a conception of addiction on which addicts lack control over their behavior. Still, I suspect it is lurking behind much of the support behind sin taxes and indicates why people might resist a biomarker-sensitive tax policy.
One tangential thought before closing: the gene employed in Fletcher’s study seems to act by increasing the pleasure of cigarettes. This has interesting implications for those that seek to find an appropriate balance of welfare in society. Does the increased pleasure from cigarettes for those with the G/C or C/C variants mean we have additional reason to have lower taxes for those people, as they can get more pleasure out of a given cigarette and so it is more efficient (for the sake of maximizing pleasure) to have them consuming cigarettes than those with the G/G variants? Or does this instead mean we should actually raise taxes on those with the G/C or C/C variants, because a given cigarette is worth more (in terms of pleasure) to them and it is only fair to charge someone what a product is worth to them? In addition, increasing taxes on those with the G/C or C/C variants might help achieve greater welfare equality, insofar as it will reduce the welfare ‘bonus’ (via increasing their expenses) that some people get from cigarettes due to their genes.
There are surely more implications besides these, and it will be most interesting to see how increasing research into biomarkers continues to affect a wide array of policy debates – hopefully, for the better.