No, Hiking Taxes Isn't the Magic Solution to Smoking

CigaretteAssef ElweterDuring my appearance earlier on the Thom Hartmann show, Hartmann emphasized cigarette taxes as a means of offsetting the "externalities" in terms of lost productivity and health costs caused by tobacco consumption. "Lots of lifestyle choices cause externalities," I told him. "But if you show up to work with a hangover, your employer suffers the lost productivity, but the government gets the taxes." Measuring costs and benefits and offsetting costs with taxes might work as a classroom exercise, but it's a non-starter in a world where costs (and subjective benefits, such as pleasure) are distributed all over the place and we don't all (yet) work for the government. That's probably why most cigarette tax advocates stick with a simple social-engineering argument for discouraging tobacco use by hiking the cost through the roof with taxes. But even they can't explain how tobacco is going to be the one popular good or service ever discovered that doesn't breed a massive black market when larded with high taxes and tight regulations.

The socially molding possibilities of taxes came up again, recently, in an article in the New England Journal of Medicine that called for tripling the government's take on cigarettes around the world. The authors, Prabhat Jha, M.D., D.Phil., and Richard Peto, F.R.S., write:

Tripling inflation-adjusted specific excise taxes on tobacco would, in many low- and middle-income countries, approximately double the average price of cigarettes (and more than double prices of cheaper brands), which would reduce consumption by about a third and actually increase tobacco revenues by about a third. In countries in which the government owns most of the industry, as in China, the distinction between taxes and profit is fairly arbitrary, but doubling the average prices would still substantially reduce consumption and increase revenue.

But this isn't a hypothetical policy proposal. We already know, because it's been done, that hiking cigarette taxes breeds black markets in smuggled and counterfeited (illegally produced knock-off cigarettes sold under phony labels) smokes. New York has the highest cigarette taxes in the country, at $4.35 per pack, plus another $1.50 levied in New York City. The result is that 60.9 percent of cigarettes sold in the state are black market, according to the Mackinac Center for Public Policy. Washington state has high cigarette taxes, relative to its neighbors, and a massive smuggling problem (48.5 percent of the state's cigarettes come from the black market).

You could, I suppose, impose globally uniform taxes to discourage the easy sort of smuggling from low-cost jurisdictions to high-cost ones. But that would just create an incentive for illegally produced cigarettes, just as black markets supply cocaine, heroin, and marijuana where they're completely banned.

How do the authors address this problem? In one paragraph.

Smuggling is a concern when tobacco taxes rise; about 10% of all cigarettes manufactured worldwide are already untaxed. Use of specific excise taxes on tobacco (rather than ad valorem taxes), stronger tax administration, and practicable controls on organized smuggling can, however, limit the problem. Even with some smuggling, large tax increases can substantially reduce consumption and increase revenue (Figure 4), especially if supported by better tax enforcement.

The solutions are "stronger tax administration" and "practicable controls on organized smuggling"? Really? It's a shame nobody ever thought of that before through all the efforts to suppress black markets throughout history.

Well...Maybe black markets are just an externality that can be offset by a wee bit more tax.

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  • ||

    Well...Maybe black markets are just an externality that can be offset by a wee bit more tax.

    I have a brilliant idea!!! Lets tax and regulate the Black Market!!!

    /progressive

  • RannedPall||

    I'm still surprised that (as of right now), I could get a pack of Marlboro reds for about $5.25 in the great prog paradise that is California. And when they tried to raise the cigarette tax a few years ago through a proposition, it failed, although it was close. I doubt these prices will last for long though, as the progs will eventually get their way. Not that it matters to me financially anymore, as I quit smoking 6 months ago (at the ripe old age of 22).

  • Lord Humungus||

    It wasn't the price that stopped me smoking.... the threat of cancer + middle age + the fact that it now tastes like hell.

  • widget||

    How does contracting lung cancer or emphysema from smoking when you're in your late 60s or early 70s bear negatively on the government's treasure chest? If only people stopped dying of something or other we'd be flush.

  • ||

    So it's been tried, shown to not work, and here some CONTROL types are, trying to...do the exact same thing again. What's the definition of insanity again?

  • Restoras||

    Progressivism?

  • Brian D||

    And once we get enough people to quit smoking we'll complain that revenues have decreased and start taxing things that led people to quit. I'm looking at you, once-virtuous-but-now-suddenly-evil E-cigs!

  • Restoras||

    Reduce consumption and raise revenue...

    That is one magic loogie.

  • Marshall Gill||

    What infuriates me about the "loss of taxes" bullshit is that it assumes that if I don't show up for work, for any fucking reason I choose, then I am robbing the People of their rightful taxes on my labors. They also seem to impose the medical cost of any illness I might get as a result of smoking on others, but I am pretty sure that as long as you have a few bucks in the bank, you are held personally responsible.

    In short, fuck off slavers!

  • OldMexican||

    Hartmann emphasized cigarette taxes as a means of offsetting the "externalities" in terms of lost productivity and health costs caused by tobacco consumption.


    Ah, don't you love how socialists fill their mouths with the word "externalities" like a male prostitute fills his with c||m?

    The favorite go-to word to justify authoritarianism using economic terms.

    Measuring costs and benefits and offsetting costs with taxes might work as a classroom exercise,


    Only by making a ceteris paribus assumption which would be too general to be applicable to the real world where everybody is different.

    but it's a non-starter in a world where costs (and subjective benefits, such as pleasure) are distributed all over the place and we don't all (yet) work for the government.


    Indeed the idea does not take into consideration the very fact that only individuals act, not groups.

  • Austrian Anarchy||

  • Pope Jimbo||

    Why isn't there a tax on wheelchairs and mobility scooters? Those fuckers have a lot of externalities (ramps, bus lifts, etc.). And -just like smokers- what are they gonna do if taxes go up? Start walking?

  • Austrian Anarchy||

    Where have you been? Obamacare taxes a whole host of devices now. Problem solved.

  • GILMORE||

    Please, for the love of god, can we stop playing along with the ridiculous fucking idea that they actually give two shits whether said taxes actually *work* at achieving whatever social engineering experiment they've deemed intervention-worthy at this particular moment in history? I'm sick of it. I'm sick and tired of these motherfuckers endlessly be pretending to be *trying to help people* when in the end, what they want is not to make problems disappear, but they want to *use* said issue to a) TAKE MONEY and b) CONTROL PEOPLE. So what if this particular experiment does nothing to reduce smoking? They now have a staffed 'department of X' to busy itself intervening in various other ways in perpetuity (because, DUH! the first idea didn't work!), and more money to spend on other 'as-advertised' good-for-you programs that steadily increase the areas Where There Oughtta Be A Law.

    Seriously. "Good Intentions" my ass. They will posture endlessly about how morally superior, un-racist they are while guaranteeing generations of blacks are crippled by shitty public schools and lack of economic opportunity, how their hearts bleed for brown folk of the 3rd world, while maintaining tariffs against trade, trying to ban technologies that prevent starvation, signing treaties restraining economic development. I will no longer take that shit at face value any more. Any time they propose anything, its always the same story = MOAR CONTROL. Never do they care about the results.

  • widget||

    I don't mean to cheer you up, GILMORE, but busing was stopped in its tracks during the heyday of progressivism.

    http://en.wikipedia.org/wiki/Desegregation_busing

    It's still possible that a progressive idea is so stupid that it's primary beneficiaries reject it.

  • GILMORE||

    "It's still possible that a progressive idea is so stupid that it's primary beneficiaries reject it."

    Oh, I don't doubt that.

    I expect Obamacare to be dead by early 2015.

    However, what I object to is the idea that anyone could possibly make the case that it (or any proggy law) was designed with 'good intentions'. The intentions are, with few exceptions, to subordinate and to exploit: full stop.

  • RishJoMo||

    Sometimes man you jsut have to roll with it.

    www.GetzDatAnon.tk

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