Soc (2010) 47:328–332 DOI 10.1007/s12115-010-9337-z
SYMPOSIUM: THE COMMON GOOD
Taxing Antisocial Behavior for the Common Good Peter Lorenzi
Published online: 26 May 2010 # Springer Science+Business Media, LLC 2010
Abstract Long-term sustainable social policy strategies include attention to sins and their prosocial benefits. Antisocial goods and actions can provide the basis for tax revenue generated to serve the public good. Sin taxes have the potential to reduce addictive, antisocial consumption activity and to increase prosocial goods, leading to sustainable, long-term strategies for economic, environmental and entrepreneurial progress. Sustainable enterprise strategies combined with taxes on antisocial behavior offer great promise yet require careful thought and prosocial leadership. Keywords Antisocial . Prosocial . Sin tax . Common good The concept of “sinning for sustainability” brings back memories of the Vietnam-era riposte, “Fighting for peace is like f&*king for virginity.” A facile analysis leads one to the conclusion that none of these three claims holds any logic. But as with most canards, there is a kernel of truth. And the purpose of this essay is to show how a seemingly antisocial act—the ‘sin’ in ‘sin taxes’—can produce a prosocial good, i.e., sustainability. “Old thinking: Companies have long mistakenly thought that adopting environmentally friendly processes adds costs. New thinking: Green practices like recycling, reducing and reusing waste can cut costs because they make company more efficient.” The Wall Street Journal offered this contrast in a March 2009 critique of the new attention to “sustainability”. P. Lorenzi (*) Sellinger School of Business and Management, Loyola College in Maryland, Baltimore, MD 21210, USA e-mail:
[email protected]
Sustainability—long-term intangible wealth creation—has three facets, economic, environmental and entrepreneurial. Economic sustainability requires efficiency in the use of resources, cost-benefit analysis, and private ownership of “common” resources. Environmental sustainability describes the process of protecting and preserving natural resources, with a focus on the economic and social costs of environmental degradation. Entrepreneurial sustainability describes the process of generating new revenues, developing new processes, and serving new customers. Entrepreneurial sustainability focuses primarily on benefits or revenues, while environmental sustainability focuses primarily on resources, inputs and costs. The popular view of an environmental sustainability strategy has been characterized by the phrase, “Reduce, reuse, recycle.” This phrase describes the philosophy and the practice of conservation of scarce, non-renewable natural resources. But sustainability means more than reducing the input costs or the damage done to environmental resources. We need a strategy built on entrepreneurial sustainability. Another simple phrase, “Improve, innovate, inspire,” more broadly addresses environmental concerns. Improve means to matter better use of the resource. Innovate suggests we determine new, creative sources of and uses for environmental resources. Inspire relates to the idea that we need to influence others to show concern for the costs and potential benefits of careful environmental resource use. “Improve, innovate, inspire” describes the entrepreneurial sustainability process. For example, the development of alternative and renewable energy to replace our economic dependence on and the environmental damage from petroleum would be an entrepreneurial sustainability approach. Prosocial leaders help to sustain the environment by applying entrepreneurial principles and practices to solving social problems. For example, domestic propagation of
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bamboo can increase the supply of a highly useful, renewable environmental resource, useful for building homes, floors and furniture, and producing 35% more oxygen than would equivalent amounts of traditional forests. The March 2009 Wall Street Journal report noted that business firms once assumed improving quality would increase costs; firms were proven wrong then and firms often held the same erroneous assumption about “going green,” that doing so would increase costs. In fact, “going green” can create wealth by reducing costs and by creating a long-term competitive advantage for the firm. All three types of sustainability would be positive goals that serve the common good, each requiring good management to produce results. In economic terms, we could use a cost-benefit analysis, where the benefit is equivalent to the accounting concept of revenue and a positive benefit-to-cost ratio would indicate that the process is efficient, profitable, or wealth creating. In accounting terms, the difference between revenues and costs is profit, or the process we have described as value creation or wealth creation. Prosocial sustainability entails long-term survival of the organization, achieved through wealth creation based on economic, environmental, and entrepreneurial sustainability efforts. Wealth is more than money. Joy, satisfaction, security or safety, human development, life expectancy, mortality, anything we value is wealth. GDP (Gross Domestic Product) is a widely used surrogate for economic wealth, although it measures economic activity, not tangible or intangible wealth. Alternatives measures of wealth include the Fordham Index of Social Health (FISH), which includes criteria such as infant mortality, child abuse, drug abuse, unemployment, elderly poverty and homicides. The Genuine Progress Indicator (GPI) measures crime, family breakdown, volunteer work, pollution, resource depletion, defense expenditures and long-term environmental damage, among other criteria. The United Nations Human Development Index (UNHDI) measures life expectancy, access to education, years of schooling, income equity, GDP per capita, health achievements, and gender equity. Other alternatives include the Gross Sustainable Development Product (GSDP) and its companion measure, the Gross Environmental Sustainable Development Index (GESDI). The American health care reform debate has generated significant debate as to how to define and how to measure the common good, i.e., what constitutes effective national health (care). In October 2009, in the Wall Street Journal Carl Bialik argues that the widely cited World Health Organization report relies on misleading criteria to measure national health care: health level, responsiveness, and inequality in health care outcomes, in responsiveness, and in individual spending. Further, lack of data for some criteria in some countries led one economist to label the resulting ranking “nonsense”. Later that month, the Wall
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Street Journal’s William McGurn picked up on the problem: Contrasting the American system to Singapore’s, a doctor in Singapore noted the complexity of the American system, “There are so many parties in the American system that do not really contribute to care.” In effect, the benefits of the American health care system are often beneficial to parties that make little or no contribution to health care, to the common good. In Forbes, Peter Huber notes that the carbon emission and greenhouse gas debate pits high-level emission (but low emissions per capita) poor countries against low emissions per unit of GDP wealthy countries. The result: China demands a reduction in absolute emissions by the wealthy countries while also demanding that the wealthy help China and other emerging economies to curb their own high levels of emissions. In either case, both the rich and the poor see high levels of energy consumption (and emissions) to be inextricably linked to economic growth and progress, while failing to measure or to address the human, social costs, i.e., the loss to the common good. In 2009, France moved to significantly increase the tax on carbon-dioxide emissions by firms and families, nearly $25 per metric ton of emissions. In Forbes, David Ewalt notes that microlending may constitute a middle ground, where poor countries use a micro version of capitalist lending practices to help the poorest of the poor to improve their lives, including their environment. Cleaner, more sustainable energy consumption can be one result of micro-investments. His colleagues, Janet Novack and Stephanie Fitch, claim that punitive tax policies can also have a caustic, unintended effect, when a two-income household finds the tax burden to exceed the value of the second income, discouraging work and wealth creation.
Finding Public Profit in Personal Peccadilloes Personal sin has its public benefits. Taxing antisocial behavior with sin taxes can produce significant prosocial effects. Yet antisocial consumption may be difficult to discern. For example, apparent addiction to gasoline may be masking a deeper addiction to a lifestyle. Petroleum literally and figuratively fuels a broader addiction, i.e., lifestyle. People need gasoline to fill the tanks of their large SUVs, but the underlying reasons are more that the person wants to be able to drive to school, to the mall, to visit relatives without even contemplating public transportation or amount being spent on finite resources. A similar argument can be made for air conditioning: Are Americans addicted to energy or to comfortable summer temperatures in their homes, shops, schools, and offices? There may be a conscious or subconscious ‘disconnect’ between personal choices and public policy positions
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expressed by the subjects, and this disconnect may be present in the general population. Specifically, those who spurn excessive consumption in general may not judge specific personal choices by others as inappropriate acts of (excessive) consumption. For example, a libertarian or minimalist may reject excessive consumption as a personal lifestyle choice, yet accept consumption by others of some things society frowns upon, e.g., heroin. Behaviors that meet satisfy just two of the three sin tax criteria—addiction, self harm, and public harm—may still be candidates for sin taxes. Sustainable prosocial strategies can reduce antisocial activity. Sin taxes remain a viable, important public policy tool for raising needed government revenues, for encouraging prosocial behavior, and for curbing antisocial consumption.
Prosocial Sin Taxes The discussion and adoption of sin taxes has expanded as legislatures hungry for tax revenues looked to ‘sin’ as a lucrative source of revenue during recessionary times. The effect of these taxes would be prosocial: With stiff taxes on targeted antisocial behaviors, undesirable, addictive behavior would cause them to decrease while generating revenues for prosocial activities. Politicians have identified numerous targets for sin taxes.
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reversal, decriminalizing marijuana consumption, which even leads to questioning its role as an antisocial behavior. But the debate over marijuana’s legalization and use is both fiery and fragmented. Some oppose its decriminalization while other support its legalization; some would prefer to tax its use while others would prefer marijuana use to be legal, unregulated, and tax-free. Traffic Congestion In New York, city officials have argued over the costs and value of traffic jams. David Owen claims that being snarled and delayed in traffic can be a “common good” when the resultant frustration and cost drives people to public transportation. That is, traffic congestion delays are a sin tax, discouraging driving and promoting the common good—eventually. London took the lead in applying a more direct sin tax on driving—not on congestion—by charging vehicles for entry into the most congested part of the city. New York has considered a similar plan, including a weekday charge of $8 on cars accessing certain portions of Manhattan between 6 a.m. and 6 p.m. Speed and traffic light cameras and their resultant fines— sin taxes on speeding and running traffic lights—further extend this tax on undesired forms driving. Baby Bonuses
Alcohol consumption is a well-established, popular sin for politicians to tax. Beer, wine and spirits score high on the addiction, self harm and public harm scales. These substances form the major portion of guilty pleasures whose consumption is both encouraged (to generate sin taxes) and discouraged (with sobriety campaigns) by public officials. Sin taxes face the greatest opposition from those who produce and sell the sin. Recently in Russia, Danish brewer Carlsberg fought proposed increases in Russian beer taxes that started at 200% in 2010, followed by subsequent increases of 11% and 20%, respectively, in subsequent years. Non-alcoholic yet addictive, Coke expanded its rationale for opposition to a proposed soft-drink tax saying, “Don’t blame Coke” for the increase in obesity in America. Instead, Coke’s CEO blamed a lack of exercise and poor nutrition (but not Coke!) as the antisocial behavior that needed to be corrected, but not with a tax on soft drinks.
While many parents would describe child-rearing as taxing, governments in industrialized countries facing a “birth dearth” are finding new ways to encourage child bearing. In fall 2009, the Japanese government proposed $3,300 a year credit for each new child under the age of fifteen. In this view, children are a “common good” for the sustainability of the economy and the culture. Subsidizing children is then a “reverse” sin tax. Some firms are trying to encourage prosocial behavior with what Forbes’ Robert Langreth describes as “healthy bribes.” As one corporate executive noted: “People shop around for an MRI. They buy the generic drug. Then they get in their car, light a cigarette and drive through McDonald’s and supersize it.” Firms want people to shop for value but also to exercise more, to curb their smoking, to eat better, and to eat less. One study found that obese adults cost $1,400 more in annual medical expenses. Firms will offer incentives—reverse sin taxes—for good or improved behavior and health.
Marijuana
Chocolate
In California, conflicts over legalization and medicinal use of marijuana highlighted the problematic nature of the drug. Legal, medicinal use of marijuana constitutes a sin-tax
The BBC reported that Scottish legislators voted against a proposal for chocolate to be taxed in the same way as alcohol and cigarettes to tackle increasing levels of obesity.
Alcohol
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One legislator warned that chocolate had lost its status as a “treat” and had become a harmful addition for some people. However, his motion calling for a tax on chocolate was. He said he was “disappointed” but glad his suggestion had provoked debate. Speaking after the vote, the legislator, also a trained food scientist and nutritionist, said: “A little of what you fancy may do you some good, but as nearly one in four people in Scotland are obese a lack of physical activity, an unhealthy diet and larger portion sizes are clearly taking their toll on the health of Scotland.” “Chocolate has lost its status as a special treat and I think that if we charged a tax on it then, over a number of years, we could restore that status. ” He told the BBC that obesity was a “mushrooming” problem, and Scotland risked heading the same way as the United States. He added: “There is an explosion of obesity and the related medical conditions, like type 2 diabetes. I see chocolate as a major player in this, and I think a tax on products containing chocolate could make a real difference.” Representatives from the food and drinks manufacturing industry dismissed the suggestion. A representative of the Food and Drink Federation said: “Introducing regressive taxes on the foods that consumers love would result only in lighter wallets, not smaller waists—particularly as we already have to pay VAT on all our chocolate purchases.”
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Lotteries combine entertainment and the promise of gain; public perceptions of lotteries oscillate between enthusiasm and revulsion. Today public lotteries operate in 42 states and in 2006 Americans spent $57 billion or about $500 per household. Little of this money made its way into states as tax revenue; most lottery states get no more than 2% of their budget from lottery ticket sales. The lottery even played a role in the development of derivatives: The modern illegal numbers racket, in which people bet on a reliable daily number, started as a form of insurance whereby lottery players could make small side bets to hedge their risk—by betting against their own number, for example. Fat, Sugar and Salt France considered raising taxes on foods that are too fatty, too sugary, too salty and not strictly necessary, with things like soda and fast food as possible targets of the tax. The proposal would raise the value-added tax on some foods, to 19.6% from 5.5%, and is backed by the country’s budget and health ministries. According to one senator, taxes should be levied on foods that are “nutritionally imbalanced.” He added, “We should leave the Camembert alone.” Tobacco
State Lotteries State-run lotteries, once an illegal activity controlled by criminals has become a significant source of tax revenue. A de facto voluntary tax, buying lottery tickets, has replaced more traditional government revenues generated by taxes on property, wealth, or income. The lottery wars asks, “Imagine a standard NFL football field. Somewhere in the field, a student has placed a single, small, common variety of ant that she has marked with a spot of yellow paint. You walk onto the field, blindfolded, and push a pin into the ground. If your pin pierces the marked ant, you win. Otherwise you lose. Want to give it a go?” Thus is how a mathematician described the odds of winning a Powerball lottery. Economists have derided state-run lotteries as “a tax on stupidity”. The government is encouraging gambling and, worse, it is encouraging a bad bet. Even in tough economic times, in ravaged cities like Detroit, state-sponsored gambling thrives, mostly at the expense of the poor. Lottery and casino customers are disproportionately poor and the government ‘take’ thus becomes a regressive tax. Some people get seriously hooked, ruining themselves and their families. And yet, since the 1960s, taxpayers and legislators have embraced lotteries as a means of generating public revenue, and eager players have lined up for a remote chance of a payoff.
American core consumer prices rose in March 2009 due to an 11% increase in the cost of tobacco products. Sin taxes affect different income groups in different ways; smoking is more prevalent among the poor. Economic data show that life—and taxes—ends up being harder for those with lower incomes. San Francisco and New York—richer portions of the country—reported slower rates of economic decline than the rest of the nation. The Atlanta Fed showed no relief for the region. In July 2009, a Wall Street Journal report noted states’ estimates of a $5 billion loss in sin taxes due to cigarette smuggling across state lines, meaning that states directly lose money when people break the law. Prostitution and Pornography Prostitution is legal in some American states and in a few countries, e.g. New Zealand. The “oldest profession” seems highly resistant to efforts over thousands of years to eliminate this behavior. Can it be moral to tax something that fits the religious category of “sin” that often earns public contempt, and that is widely accepted (however grudgingly) as victimless, consensual sexual relations? Or should the behavior be proscribed and punished? The New York Post featured this headline, “Stripper tax is hard to bare,” when a Brooklyn assemblyman introduced a bill to require patrons to pay the state $10 every time they visit a
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strip club or topless joint, claiming the fee could raise as much as $500 million for victims of human trafficking, domestic violence, sexual abuse and child prostitution. States have increasingly turned to the adult-entertainment industry to help close budget gaps in recent years. Texas lawmakers are fighting to save a similar $5 “pole tax,” which was struck down as unconstitutional by a state judge. Pornography has become more widespread with the advent of video and private, pay-per-view channels available to viewers. Significant expenditures for pornography are actually collected by cable television and Internet operators, not just the producers of the pornography. In the last 25 years, pornography in the United States has become a multi-billion-dollar business.
Sustainable Prosocial Sin Tax Strategies Augustine and Aquinas recognized that there is broad, gray area that separates just taxation and legalized plunder (Todd 2008). But tough economic times cause governments to seek new sources of revenue. This intensified search for revenue can cause politicians to explore areas previously outside their typical consideration. Tax increases on income have become widely unpopular. Consumption taxes have increased in popularity. The practical and moral issue is to find a politically satisfactory method of taxation that raises revenue without reducing the underlying economic activity. Sustainable entrepreneurial and economic strategies may be more valuable than are environmental strategies in achieving long-term sustainable lifestyles. For instance, rather than attack consumption, entrepreneurial sustainability strategies should increase the consumption of prosocial goods and services. Cost-effective, economic strategies are more sustainable than are expensive efforts to “go green,” where a wealthy celebrity spends $15 million to reduce her carbon footprint. Sin taxes simultaneously discourage antisocial consumption and raise revenues to invest in environmental strategies for sustainability.
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Lorenzi (2004b) offered three ascending levels or “orders” of prosocial leadership behavior, namely “give a man a fish,” “teach a man to fish,” and “teach a village to raise fish,” respectively. A fourth level merits attention for its potential contribution to a sustainable global economy: “Teach teachers to teach a village to build a sustainable fishing industry.” Critics have repeatedly shown the magnificent failures of massive aid programs, i.e., firstorder prosocial behavior, or simple wealth transfer. Only by teaching the importance of third-order prosocial behavior in building sustainable, wealth-creating societies can we expect real, change and progress in social justice. Longterm survival of the planet requires environmental, entrepreneurial and economic strategies. Strategies that improve, innovate and inspire contribute to this prosocial quest. The research shows that some antisocial behaviors are not addictive and may not be amenable to sin tax strategies. The results suggest some potential for prosocial, sustainable, sin tax strategies. Taxes on antisocial behavior—sin taxes—are an effective, efficient, fair, and moral means to provide prosocial sustainability, especially when they are an alternative to taxes on wealth creation.
Further Reading Lorenzi, P. 2004a. Sin taxes. Society, 41(3), 59–65. Lorenzi, P. 2004b. Managing for the common good: Pro-social leadership. Organizational Dynamics, 33(3), 282–291. Todd, C. 2008. The ethical basis for taxation in the thought of Thomas Aquinas. Journal of Markets & Morality, 11(1), 41–57.
Peter Lorenzi (Ph. D., The Pennsylvania State University) is a professor of management at Loyola University Maryland. He teaches leadership and social entrepreneurship courses for undergraduate, graduate and executive students and studies the effects of prosocial leadership, social gifts, and sin taxes on individual and organizational behavior.
