tobacco taxes

If you are reading this post, chances are you are aware of the new taxes that the New York state legislature have heaped onto already existing tobacco taxes in the state.  And like previous legislation, the new taxes fail to discriminate between fine tobaccos usually enjoyed in moderation (pipes, cigars, etc.) and the common cigarette. But we really shouldn’t be surprised that state and city politicians seem intent to remain ignorant about basic distinctions between fine tobacco and common cigarettes. After all, it is in their interest to stay ignorant: ignorance allows politicians to to exploit the democratic process to target all smokers for funding.

At its most basic level, though, fine tobacco lovers should realize that new taxes are simply a more obvious manifestation of age old politics: group a (revenue hungry politicians) joining group b (well-meaning anti-tobacco groups) to unfairly, unreasonably, and punitively tax and coerce group c (those who enjoy tobacco) out of their money and their individually chosen lifestyles.

What is most interesting about New York City as a case-study for tobacco public policy is how tyrannical and simultaneously counterproductive it ultimately is. Recent decades have seen NYC develop a legal precedent for higher tobacco taxes and tighter smoking regulations.  This public policy mix, however, has and will continue to have dramatically negative effects on individual liberties and the tax revenues that politicians today are so desperate to take from vulnerable groups of citizens.  As the city bans smoking in more and more places, many fine tobacco lovers have had to move to lounges simply to have a place to smoke. This is a bearable scenario as long as cigars/fine tobacco stays reasonably priced. Unfortunately, tobacco tax increases push prices up, which effects customer purchase decisions – so less go to lounges. Lounges find themselves more and more burdened by taxes, regulation, and a dwindling market, and ultimately go out of business. Smokers of all types (even moderate cigar smokers) suddenly find themselves with overpriced products and no place to smoke. Anywhere.

The essential result is a government mandate by the coercive power of taxation and regulation to make you live your life a certain way.

The causal chain can be summarized as follows:

1. Government implements tobacco taxes.
2. Some people (on the margins) stop smoking.
3. Government bans smoking in public places.
4. Individuals must go to private locations (lounges or home) to smoke.
5. Government wants more money, and raises taxes the easily taxable: tobacco.
6. Taxes are passed on to consumers, and less can afford lounges/shops.
7. Tax burden and decreased market close lounges.
8. Smokers are left with almost no locations to smoke legally.
9. Some smokers break the law, many cannot afford to smoke/abide by the law.
10. Tax revenue from smoking drops off – politicians have overtaxed and exhausted tobacco users. They now turn to increasing taxes on the rich, businessman, other products, or the poor through inflation (on the federal level).

Result: Individuals for all intents and purposes lose the freedom to smoke. The government has coerced (ultimately at the barrel of a gun) a particular set of values and norms on a large group of individuals. The government destroys a source of revenue.

No one wins.

The most discouraging aspect of the current political trend, though, with respect to tobacco taxes and regulation is how obviously short sighted it is.  State and city policy makers don’t understand the importance of basic incentives.  As taxes rise, rational smokers will undoubtedly begin to wonder, “if tobacco is so expensive here, why not simply purchase it elsewhere where the taxes don’t apply?”  Evasion of unreasonable taxes takes many forms: some may buy online, through unregistered dealers (aka the black market), or will simply drive across state lines.  Thus as the state raises taxes in the hope of increasing tax receipts, they will ultimately begin pushing revenues to other states or organizations. No one benefits. State tobacco revenues will stagnate, some smokers will be forced to quit, and some will still smoke – but only after more hassle and frustration.

Does all of this sound extreme? I think so. But then again, take a look at the tax increases in the past ten years, and you will realize that imagining taxes perpetually increasing really isn’t that hard.

And so I am stuck wondering when politicians and those who hate any and every form of tobacco will realize that democratic theft and tyranny, aside from being morally reprehensible, actually won’t solve any problems in the long run. We’ve tried Prohibition before – why should anyone believe that half-assed Prohibition will work any better?