10/23/2012 05:32 pm ET Updated Dec 23, 2012

Death vs. Taxes: Does One Delay the Other?

"Sugar, rum, and tobacco are commodities which are nowhere necessities of life, which have become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation." -- Adam Smith, The Wealth of Nations, 1776

Some of the nastiest political battles in the health arena these days are over taxation. That has been true even before the Supreme Court upheld "Obamacare" on a somewhat surprising taxation argument. Of course, such debates are not new -- recall the Boston Tea Party, ignited over British taxation on yes, the healthy drink known as tea. But these scuffles have become increasingly common at local, state, and federal levels as the health "externalities" of various common products become apparent -- and as health budgets are ever more strained.

According to The Economist: "Externalities are costs or benefits arising from an economic activity that affect somebody other than the people engaged in the economic activity and are not reflected fully in prices." A common modern example would be any form of environmental pollution, but as noted by Adam Smith above, other common products entail externalities as well. The irony here is that Smith is regarded as the founding guru of free-market economics, and coined the term 'the invisible hand" for how economics might work in a "system of perfect liberty" -- the term "capitalism" was not yet in use. Yet modern politicians, tea partiers or not, tend to out-Smith Smith by signing on to the "no new taxes" pledge of Grover Norquist and hold us all hostage to externalities ("Who the hell is Grover Norquist, anyway?" former President George H. W. Bush quipped while decrying this pledge recently, showing again how more "conservative" the Republican party has become over time).

One critique of such user taxes or fees is that they are "regressive" -- everybody pays the same, regardless of income, and poorer people tend to use some of these products more. It's a valid point, strictly speaking. But viewed in context of the aggressive marketing of tobacco, alcohol, and sugar to people of lower socioeconomic status, it appears we are battling against a kind of "class warfare" and must do what we can to reduce the harms of these products -- while still preserving the "right" to buy them, albeit without forcing external costs on others. Nor are these really "sin taxes" -- smoking, drinking, and eating sweets are not sin in most people's views -- although they can be an addiction.

What a "no new taxes" pledge really means with regard to unhealthy products is this: "Companies producing (tobacco, alcohol, sugar, etc) and consumers using it are free to do so all they want to, and it's just too bad that all of us pay for that via increased health and other costs -- and taxes." So they are not truly opposed to taxes, but just don't want users and corporations to pay their fair share of costs.

Witness these recent skirmishes just from my local arena:

Alcohol: In 2010, San Francisco considered a tax on alcoholic beverages that amounted to 3 cents per serving of beer, wine at just under a nickel per glass, and liquor at 4 cents per shot. But alcohol industry lobbyists camped out in City Hall until they had the votes to kill the fee; two local politicians told me after they would have liked to vote for it, but "just couldn't."

Would people really drink less due to such minor increases? It's hard to imagine them discouraging anybody from ordering a drink -- if it cost you more than an additional quarter a day, you might need professional help -- and the San Francisco Controller estimated overall consumption would decline less than 1 percent; but even so, the fee was projected to raise $16 million dollars annually. The city bears the cost of $17.1 million each year for medical care of people with alcohol-related illnesses. If the new fee cost any drinker more than, say, a quarter per day, that's a different issue that might warrant professional help.

Tobacco: Proposition 29, narrowly declared defeated in June, would have raised taxes by $1 a pack to $1.87 -- still in the middle of states in this regard -- and using the proceeds for research. In this case, the increased price would indeed decrease consumption, especially among young people -- and that's the point, even more than the funds that would have been raised for cancer research. Thus "Big Tobacco", fearing sales losses of up to $1 billion annually, spent $50 million to defeat it. They won, just barely, even though Prop. 29 was projected to save $5 billion and more than 100,000 lives in the long run (although, as legendary economist John Maynard Keynes famously quipped, "In the long run, we are all dead").

Sugar: Obesity threatens to become our biggest health issue, for both children and adults. A package of research on sugared beverages, the largest single source of calories for Americans, posted last month by The New England Journal of Medicine should put to rest doubts that these products are a significant part of the problem. New York City just banned some portions of sugary drinks, and Richmond, Calif., led by a cardiologist-turned-politician, is trying to add a penny-per-ounce tax. Yet front groups for the food industry are fighting the proposal mightily (and fighting disclosure of their funding). One criticism is that education should be enough. But in the same NEJM issue, Thomas Farley wrote: "Education about the risks of obesogenic foods and beverages is absolutely necessary, but the continued growth of the obesity epidemic makes it clear that education alone will not solve this problem." In the meantime, we all will pay more for overconsumption and obesity, whether we fit that profile or not.

In a new piece in The New England Journal of Medicine, two public health experts in economics and law write:

"Taxes are an appealing mechanism of public health regulation for several reasons. They proffer "nudges" and market-based solutions as alternatives to rigid mandates. Tax-based policies retain an element of voluntariness, especially since lawmakers can calibrate the tax penalty to the importance of the desired behavior change. There's strong evidence that taxes affect consumption decisions. Finally, tax strategies are "win-win" for governments, either leading people to take health-enhancing steps or collecting revenue to fund health or other programs."

So there you have it -- a form of the beloved "market-based" solutions! It's easy to say one doesn't trust the government and even easier to say "no new taxes." It's a bit more complex to discern what that really means. We're told death and taxes are unavoidable; is it ironic that by not having enough of the latter we get more of the former?