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Sin taxes for Medicaid are regressive

The Oregon Health Authority is proposing whopping tax increases as a way to balance its Medicaid budget.

The Oregon Health Plan, which covers Medicaid patients in Oregon, faces a budget deficit of some $830 million in the coming biennium. The agency hopes to fill the gap, in part, by raising taxes on wine, beer, cider and cigarettes. The increases — 150 percent on a pack of cigarettes plus 10 percent increases in alcohol taxes — no doubt will be sold as health measures that just happen to raise oodles of boodle along the way.

Sin taxes are popular because so many of us use the “sinful” products not at all or not terribly regularly. They are taxes on things acknowledged to have negative repercussions on society.

There are good reasons to tax them, but the taxes can be regressive. People who make less money tend to spend more of their money on alcohol and cigarettes.

Any health impact of increased sin taxes may indeed be progressive, but what’s really the likely outcome? People will just be paying more to get what they want.

The affordability of booze and cigarettes doesn’t transform people into health nuts. It’s cheaper to drink water, not wine. It’s cheaper to be a nonsmoker than a smoker.

It’s not like jacking up prices on sinful products over the decades have turned smoking and drinking into rarefied habits of the wealthy. A sin tax increase can be an effort to do good that does bad for the poor.

Oregonians would be better served by a broader, general tax that is not so regressive.

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