Couldn't They Have Predicted This in Advance?
Politicians in Annapolis, MD are scratching their heads wondering what happened to all those chain smokers who were supposed to help balance Maryland's budget. Last year the legislature doubled the cigarette tax to $2 a pack to pay for expanded health-care coverage. Eight months later, cigarette sales have plunged 25% and the state is in fiscal distress again.
Residents of Maryland's Washington suburbs can shop in nearby Virginia, where the tax is only 30 cents a pack, and save at least $15 per carton. The Maryland pols are so afraid this is true that they've made it a crime for residents to carry two packs of cigarettes that weren't purchased in the state. In other words, the state says it's legal to smoke, so long as you use cigarettes that the government can tax and thus become a financial partner in your bad habit. But if you dare to buy smokes across state lines, you can be fined.
ECON 101: If you tax something you get less of it, especially if perfect substitutes are available nearby (like cigarettes in Virginia). Q: Do politicians just not understand simple economics, or do they understand it, but ignore it for political purposes?