The state legislature approved a tax hike on tobacco of $1 a pack. The state expects to bring in an extra $44 million dollars from the tax hike. It is great to see that the state is finding creative ways to bing in more revenue, but where is that money actually going to come from?
Turns out that poorer people are more likely to be smokers (http://www.sciencedaily.com/releases/2010/01/100115112048.htm). So does this count as yet another tax on the poor? In addition, smoking is a very difficult thing to give up. Will this hike actually cause some smokers to quit or decrease the amount they smoke? Maybe a few. Poor people are very good at stimulating the economy, so if poor smokers have to spend more to support their habit then the state will get money that they would have spend elsewhere in the economy.
Maybe the state should start encouraging smoking among its citizens, especially the more affluent ones. The more ciggarrettes sold, the more money that goes to the state coffers. Instead of those anti-smoking ads they could put out adds that target richer residents of Utah to try and get a few more bucks out of them.
March 15th, 2010 at 9:17 pm
I find this article quite interesting because of whenever I hear about taxing tobacco I have to think of the time I was in Japan. It seems like everybody smokes. A lot of the cigarettes sold in Japan are sold in vending machines on the side of the road. There are even hard liquor vending machines on the side of the road. I also surprised to see pornography so easily accessible. Porn was sold in stores that would be equivalent to our Maverick. I was curious why in the world would cigarettes, alcohol and porn be so easily accessible? Although I have no official data to back this up, I concluded that Japan is taxing addictions. Addictions have a very inelastic demand curve and therefore to an extent, no matter the supply or demand fluctuations, people will continue to consume those products. Those people consuming these products put a very high value on their addiction and are willing to pay the price for them. From this perspective, I can see why states would try to tax addictions because they think people will pay the extra money without second guessing themselves.
Who is to say that the smokers in Utah don’t travel out of the state to get their cigarettes and liquor and buy it in bulk? Then none of the revenue would stay in the state and you still have the smokers. Under this circumstance, the demand for smoking wouldn’t go down and you would lose the revenue. That is a crappy deal. It is a classic example of game theory. But, what if the entire United States simultaneously added a dollar per carton tax on cigarettes, or a dollar per 8 oz. tax on hard liquor, or a tax on porn? Game theory would be reduced because the consumers most likely wouldn’t travel to Mexico to get some corona, or Cuba to get some cigars. If the inelastic demand curve held true the state could raise some serious revenue. If people decided that smoking, drinking and porn weren’t worth it, they’d stop and demand would go down increasing health from less smoking, but at the same time revenue would go down.
Taxes on addictions might be a good idea if you can limit how those who consume the products get the products to keep the revenue from the tax where it was intended to be. But controlling where people get their products and adding more taxes to it is bogus. Cut the taxes and the regulation and people will be better off assuming they are rational.
March 15th, 2010 at 9:29 pm
Adam Smith says people are rationally self-interested, but I think when addictions come into play, people lose their rationality. In this tax increase, the state government is exploiting the irrationality of addicts. When I hear that the state is trying to reduce tobacco consumption for health purposes, I say yeah right. Obama has even thought of exploiting soda drinkers by adding a “sin tax” to carbonated beverages. Back to smokers, I don’t think we should discourage smoking. I say we should encourage smoking! Why? Because that means more people die before they can receive social security checks, which also means there will still be some left for me.
http://www.nydailynews.com/news/politics/2009/09/08/2009-09-08_president_obama_says_sin_tax_on_sodas_is_food_for_thought.html
March 15th, 2010 at 10:50 pm
OMG, Javan. Get yourself under control. More people will die? Completely disregarding the moral issues you just presented, my heart wants to argue that the cost of someone contracting lung cancer would outweigh that of living longer, but apparently I’m wrong… http://www.huffingtonpost.com/2009/04/08/how-much-does-smoking-cos_n_184554.html.
But I still hate your comment. Mmmk? Mmmk.
March 15th, 2010 at 11:40 pm
Javan, I have figured out your ploy…your actual intent is to stop them from smoking. If you tell them to smoke they will say no because you told them so! Awesome! Everyone is happier and healthier!
But what is next? Fast food chains are next. They are a contributor to unhealthy lifestyles and actions that may cause cancer.
http://www.cancerproject.org/media/news/cheapeats_findings.php
Looking at this, the short term gain is the cause of long-term costs (i.e. I am a hungry college student. The big mac will quench my hunger, but I will have to pay for it later). Smoking is out of question by the time I am 75. The findings from studies and the lack of coverage of health insurance (because I smoke) won’t allow me to smoke. But because of the “a” word (affordable, not addictive) it is not my fault. At least that is what I will tell everyone.
March 16th, 2010 at 12:25 am
I actually quit smoking less then a month ago, and I would have to say that the state is trying to keep smokers smoking. Those “truth” ads were the hardest thing about quiting. Every time one of those came on the television or radio I craved a cigarette more than if i saw a Cigarette ad. It’s sad that this is the only tax hike the legislature looked at this year instead of just cutting everyones budgets and shrinking the economy even more. spend. spend. spend.
March 22nd, 2010 at 2:11 pm
Dione, I followed your link and found the following:
“A Dutch study published last year in the Public Library of Science Medicine journal said that health care costs for smokers were about $326,000 from age 20 on, compared to about $417,000 for thin and healthy people.
The reason: The thin, healthy people lived much longer.”
The irony is too wonderful. And I think I will now view it as my civic duty to eat really good fattening foods.