SIN TAXES AND PROP BETS

"SIN TAXES" are in for legislators this year! In these times of ballooning deficits, lawmakers are looking at legalizing a variety of activities such as pot and Internet gambling for the expressed purpose of taxing the activities to increase revenue. It's an interesting idea. The truth is that these activities are easily found all over the country. Prohibition hasn't seemed to limit the availability of any of the them. Many people are upset that billions of dollars are spent on these items and none of it comes back to the government as tax revenue.

Recently this discussion came up at a poker table I was sitting at. The start of the conversation was not these specific activities but instead the age-old question of: Do taxes hurt business or do they actually help grow the economy?

The Right will tell you that tax increases diminish the desire of Americans to make a profit because it's "all going to the government." ANY new tax on business will hurt the economy in a recession and will probably drive the business into immediate failure!

The Left counters by pointing out that taxes were higher under Clinton and the economy prospered. Raising taxes lets the government build infrastructure and fund education, all of which increase the ability of the country to make money.

It's a hard argument to either prove of disprove. Finally it was suggested that perhaps we should try an experiment. What a poker player calls a "prop" bet. Prop bets are based on a particular proposition. "I'll bet you $5 that I can eat 25 hotdogs in 10 minutes" is an example of a prop bet. If I'm right and I can eat the hotdogs in the time limit, I win $5. If I'm wrong about my proposition, you win $5.

Prop bets could be applied to economic policy. The Right says taxes kill business and also disapprove of activities such as gambling, porn and drugs. Here's a somewhat tounge-in-cheek proposition that would allow Conservative America to put your money where your mouth is. Legalize these three activities as a test case, tax them heavily and if the Conservative Right is correct; the country should see a huge decline in porn traffic, marijuana usage and internet gambling.

Just think, you'll be able to go to church some Sunday morning and exclaim, "The strip club down the street is closing because of the new taxes!" "The McSmitty Brothers have stopped smoking pot because the sales tax is too high!" It could be a whole new world and you will have the added satisfaction of knowing that your ideas on the dangers of taxation were correct.

On the other hand, if (and I know this is a long shot) taxation doesn't hurt business, then we have a LOT of "Sin Tax" revenues coming in at a time we need to raise all the money we can!

We laughed at this (both conservative and liberal players) for the rest of the night. Then today just for grins I thought I would see if I could determine just how much money this could raise. (Asking people to guess the amount might make a great prop bet for the next game.)

The results were rather astounding.

If marijuana were legalized then it is estimated that $7.7 Billion dollars would be saved by eliminating enforcement, incarceration and prosecution of marijuana crimes. If you taxed the drug at the same rate as cigarettes & alcohol (other Sin Tax items) you would raise $6.2 Billion dollars in revenue for a combined total of revenue and savings of $13.9 Billion dollars

Estimates for the revenue from taxing on-line poker sites is $5.2 Billion dollars.

And an 18% tax on the porn industry would raise $2.4 Billion dollars.

So the final terms of this Economic "Prop Bet" between the Conservative Right and the Liberal Left would make it the largest prop bet of all time! Conservatives would be betting the demise of these unappealing industries against projected revenues of $21.5 Billion dollars in taxes to prove the point: Taxation kills business and hurts the economy.

Seems like this would be a win/win for the country. We're not taxing any business that the Right wouldn't like to see killed anyway. And it could save a lot of time in Congress. There's a lot of arguing over whether taxes help or hurt. This "bet" could end the partisan philisophical arguing and let them get on to something more important...like pragmatic governing!