TaxProf Blog: Lucas: Paternalism and Psychic Taxes

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October 17, 2012

Lucas: Paternalism and Psychic Taxes

Gary Lucas, Jr. (Texas-Wesleyan), Paternalism and Psychic Taxes: The Government's Use of Negative Emotions to Save Us from Ourselves, 22 S. Cal. Interdisc. L.J. ___ (2012):

Paternalism has become increasingly popular among policy makers. This Article analyzes whether the government should use psychic taxes as a tool for paternalism. A psychic tax is a government policy that imposes a psychic cost by provoking negative emotions such as fear, anxiety, or shame. This Article focuses specifically on graphic warnings on cigarettes and food. The Food and Drug Administration recently adopted regulations that require graphic warnings on cigarettes, including images of a corpse and of diseased lungs. And policy makers are also considering graphic warnings on food. For example, the government could mandate that food manufacturers place a drawing of an overweight person on unhealthy foods.

Proponents of psychic taxes argue that contrary to the rational actor model used in law and economics, people are not perfectly rational and do not always make the best choices for themselves. If failures of rationality cause people to make suboptimal choices, then in theory, the government could use psychic taxes to modify behavior and improve people?s lives.

Unfortunately, real-world governments are not perfect, so the implementation of psychic taxes presents a number of potentially serious challenges. The government?s lack of complete information, the possibility of unintended consequences, and a number of other factors make it inherently difficult to predict whether psychic taxes will in fact prove beneficial. Moreover, in some cases, graphic warnings and other psychic taxes may be deceptive. So acceptance of psychic taxes as a legitimate policy tool may lead us down a slippery slope toward policies that are harmful and even abusive. Finally, since the government is likely to target goods that are consumed disproportionately by the poor, the burden of psychic taxes will fall largely upon low-income families.

Because of these concerns, this Article expresses skepticism about the use of psychic taxes. Privately produced products and other nongovernmental solutions will often eliminate the effects of irrationality making psychic taxes unnecessary. Even when that is not the case, psychic taxes create the potential for considerable costs, many of which are difficult to quantify in advance. For this reason, the government should not employ psychic taxes without compelling evidence that the benefits will be substantial. In particular, the lack of strong empirical support for graphic warnings on cigarettes and food raises questions about whether these warnings are worthwhile.

October 17, 2012 in Scholarship, Tax | Permalink

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