"HOW SHALL WE THEN LIVE?" Francis Schaeffer

Saturday, July 09, 2005

The Truth about cigarette taxes

I don't smoke but I have been sympathetic to the nicotine addicts who have found themselves victims of state governments desires to raise revenues at the expensive of a convenient whipping boy - smokers. ( Why not drinkers? is what I ask).

Supposedly the tax is for our and their good. By taxing them, we'll spend less money on medicare, medicaid etc.
Hmm! It sounds good but other research suggests that smokers die earlier then the rest of us thereby allowing for less expenditures on medicare, less expenditures on social security, less expenditures on state nursing homes. In other words, a smoking population is a dying population. And that saves "the Gov." money doesn't it.

But there's other facts that get in the way.

The Truth About "Health Impact Fees" Read all about it HERE!

Governor Pawlenty recently proposed a 75� cigarette tax increase dubbed a "health impact fee." Increasing the cigarette tax is bad policy and opens a Pandora's box of new taxes:

* Smokers pay their way. Proponents of a cigarette tax increase claim that it will help to offset the additional health care costs imposed by smokers. However, research by the Rand Foundation and Harvard economist Kip Viscusi shows that smokers more than pay their way already. In his book, Smoke-Filled Rooms: A Postmortem on the Tobacco Deal (excerpt here), Viscusi shows that Minnesota smokers actually generate a financial gain to the state of 10.5 cents per pack - include state revenues from the cigarette tax and the state receives a financial gain of 58.5 cents per pack from smokers (see also Viscusi's article "Smoke & Mirrors")

Creates black markets. Another reason that cigarette tax increase don't bring in the money as expected is that high cigarette taxes move sales to the black market. A case in point is New York City, where exorbitant taxes on cigarettes have resulted in the creation of a thriving, billion-dollar black market for cigarettes. One former congressman quipped, "You almost can't find a legal cigarette in the city." According to economist Mark Stehr of Drexel University, the 10 states with the highest cigarette tax rates had the most evasion (untaxed consumption of 10.6%) while the 10 states with the lowest cigarette tax rates had the least evasion (untaxed consumption of 2.6%)

Oh well, LIFE in these United States. It's quite amazing isn't it.

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