Regressive Taxation Rage
March 1, 2002
By Chris Harrison

"It's your money" - George W. Bush, on his tax-cutting policies

If you were to listen to the rhetoric of a large number of politicians today, you would believe that tax cuts were the latest craze. This mantra of Republican supply-side economics has been adopted by Democratic candidates and officials as well. However, the bleating by the collective press about tax cuts hides the parlor shell game that is currently taking place.

See, as much as officials don't like to admit it, government needs tax revenues to fund programs. Maintaining town roads, building state highways, providing public education, funding national defense - all of these programs are funded by tax dollars in one way or another. These government programs really aren't that different in basic principle than individual consumer choices. They are all based on the idea that if you want to receive a decent service, you'd better be prepared to pay for it.

So, with all this tax-cutting going on in our town halls, statehouses and Washington, the question remains: where are they getting the money to fund these programs? One of the answers to this question is conveniently overlooked by the press: regressive taxes.

Regressive taxes are taxes that affect people of moderate and lower incomes more than they affect those with higher incomes. Two examples of regressive taxes are gasoline taxes and cigarette taxes. Regressive taxes are taxes that are commonly placed on necessity, rather than luxury, goods. And they often wreak more havoc on the public sector than they actually help.

The logic behind this conclusion is simple, and it can be supported by basic mathematics. Let's take cigarette taxes, for example.

Higher taxes on cigarettes were enacted after the wrongful death lawsuits brought against the tobacco companies in the mid 1990's. Americans were lead to believe that the tobacco companies were being forced to do their part in paying for health care costs of people affected by smoking-related illness. This was far from the case. In fact, the health care costs were instead shifted from the insurance companies to the smokers themselves.

"Big Tobacco" has knowingly put a harmful and addictive product on the market for years. They have aggressively marketed this product toward teenagers and people in lower income brackets. They have also lied to Congress and the American people about the harmful nature of their product, along with its addictive qualities. In short, they have engaged in less-than-ethical business practices. Now, due to the regressive cigarette tax, they have been allowed to continue marketing their product and maintain their profit margins while being absolved of contributing their fair share to the health care costs associated with this product.

People in lower-income brackets are statistically more likely to become addicted to tobacco. This is due to many factors, from lack of overall education to cigarette marketing strategies. When these lower-income folks not only pay the cost of their cigarettes, but also bear the excessive taxation associated with them, the final cost can take a substantial percentage of their income. People who earn higher wages pay a lower percentage of their overall income. This is the nature of the regressive tax, and it is not fair.

New York Mayor Mike Bloomberg has advocated increasing cigarette taxes to help account for the city's current budget shortfall. He has also ruled out raising any sort of income taxes. Given the fact that the majority of New Yorkers who smoke are poor, while a large number of people who live and work in Manhattan are better off, doesn't it become a question of basic fairness?

I will acknowledge that many people find it difficult to find sympathy for smokers. The choice they made is theirs to bear, and they also pollute the air that all of us breathe. I am an ex-smoker myself, and I have to say that quitting was the best decision I ever made. I will even admit that I now see people who smoke as having a weaker will than those of us who don't. But I will also say that quitting smoking is not easy, and I understand how so many people find it so difficult, if not impossible, to quit.

Perhaps an even better example for the innate unfairness of regressive taxation is a gasoline tax. While well-intentioned advocates of a gasoline tax tout the way it will shift demand away from gas-guzzling SUV's and toward hybrid cars and public transit, they fail to recognize how it will devastate large groups of lower-income commuters.

Many of the rural poor already spend a large percentage of their income on commuting to and from work. If a sizable gasoline tax were to be enacted, without the public transportation infrastructure already in place, many of these lower-wage earners would be left to choose between gas for commuting to work, or food on the table. If they choose to immediately feed their families, they could be left without sufficient funds for gas, in which case they could lose their jobs due to their inability to get to work. It's a "catch-22."

Many people say, "Regressive taxes are tough. Deal with it." That is easy enough to say when you aren't worried about when your next meal is coming from. That is easy enough to say when you can afford the $20,000 price tag that goes along with a new Toyota Prius or Honda Insight. That is easy enough to say when you live in an urban environment when you already have access to public transportation. But when you're not lucky enough to have these advantages, a regressive gasoline tax can be devastating to your ability to simply survive.

Plainly put, regressive taxes (such as gasoline taxes) are unfair, and they are wrong. Instead of looking to regulate fuel consumption through regressive taxation, maybe we should look at placing additional sales taxes on vehicles with low fuel efficiency, while eliminating sales tax from high-efficiency vehicles. The Rocky Mountain Institute (a market-based think tank) advocates placing a sliding sales tax on automobiles in this manner, with SUV's like the Ford Excursion and GM Suburban taxed at a rate of say, 10-12%. High-efficiency vehicles like the Prius and Insight could have a 0% sales tax. Funds raised from an "efficiency tax" could be used to fund public transportation projects. Of course, Congress raising and enforcing higher CAF� standards wouldn't hurt, either.

The real answer to our problems lies in creating and enforcing a progressive tax system based on fairness and establishing equality of opportunity. Regressive taxation only places more of a strain on the people who need the most help from the very social programs their taxes are funding. This isn't right, and it must be stopped.

Chris Harrison is a Fair Trade activist in Westchester County, NY and an overly irate citizen. He can be reached at [email protected].