It's For The Kids, We Promise!

Yesterday I wrote about the tax revenue from Colorado's legal recreational pot sales.  One of the things that I noted was that it went to "a good cause" but I want to make this point a bit clearer today.  For starters, my calling it "a good cause"was a bit tongue in cheek, but I imagine those things are hard to get across in writing.  Anyway, Colorado's revenue is slated to go towards "youth use prevention, substance abuse treatment and public health." (USA Today) We should be skeptical of this claim though, how much of the funds that already were allocated towards these programs are now being displaced?

In a perfect world when we say that the funds we generate from a specific tax increase will go towards some particular program, we would mean that it will be added as an addition to what was already be put towards that program.  In this case, that would mean that Colorado now has $2 million more dollars to spend on the positive substance abuse related problems.  Unfortunately, I think this is very rarely the case.

You may have noticed that anytime there is a proposition for raising a "sin" tax (i.e. tobacco, alcohol, marijuana, gambling etc.) that the funds are always promised towards some noble cause.  Usually it is some good intentioned program, even a necessary one, that is drastically underfunded for one reason or another.  Typically, public education for K-12 fits the bill nicely and voters are left with a choice.  Vote to raise a tax on some behavior I don't approve of to fund a program I do approve of that desperately needs the funds.  Seems like the decision is relatively simple, no?

There are a few problems with this.  As I have already alluded to, there is no way to know that the specified program won't have the funds it was already receiving cut and spent elsewhere since there was a sudden windfall from the new tax.  If this is the case, then all "sin" taxes and all taxes in general really contribute to the general fund not any specific program.  Why disguise it then?  We know from studies that people are more likely to approve a tax if the funds are promised for some specific worthy program.  But why is this a problem?  Frequently sin taxes are among the most regressive.  They apply disproportionately to low income earners and minorities specifically.  I should note here that both political parties are responsible for this particular behavior.  While I have presented this argument from a rather liberal perspective (surprise surprise) the same thing holds true from the conservative side.  When conservatives complain that funds for planned parenthood contribute to their ability to perform abortions, they are right.  Even when funds directed towards specifically non-abortion activities, it frees up other funds that were being used on those other services to be moved towards performing abortions. We should really always think of all income, all taxes and all funds as belonging to a general pool from which no tight distinctions for allocating the funds can be made.