Sun, 15 Mar 2009

Enough of the puff: tax may cut smoking rates

Well, this one by itself probably wouldn't have been enough to force quit my habit - but combined with the recent Indiana state tax increase it most certainly will. Cigarettes will simply be unaffordable. But before you cheer my salvation from Demon Tobacco, there's something you should consider. And you should be grabbing your wallet protectively, smoker or not.

These taxes, Federal and State, were raised for very specific reasons, to fund very specific programs. Neither side was aware of exactly how much the other was going to raise the tax, so both sides acted more or less independently. Both calculated the number of smokers likely to quit based on their own independent assessments, and calculated anticipated revenue accordingly, budgeting per the calculation.

Do you see the "gotcha"? Because two entities raised the tax on cigarettes, both of their assessments of the number of quitters were almost certainly low. Probably very low. Which means their actual (as opposed to anticipated) revenue will be low, probably very low.

Rhetorical question: who will make up the difference? Certain answer: general funds. And what's the source of those general funds? Why income, sales and other taxes levied on the population as a whole, of course! Looks like evil smokers will avoid paying for SCHIP after all ...

It wouldn't surprise me if Congress managed to blame smokers for quitting and causing the next deficit... although it would peg my irony meter.

Reuters - A big hike in the federal tax on cigarettes taking effect on April 1 may prompt 1 million U.S. smokers to quit, according to public health experts.

(link) [Yahoo! News: Top Stories]

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