Monday, August 11, 2008

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?

13 Comments:

At 8/11/2008 9:20 AM, Blogger Ironman said...

Mostly, they don't understand the simple economics involved. But here's the good news - at some point it will dawn on them that their take will be higher if they lower the tax so they can get a share of the profits now being earned by the bootleggers.

 
At 8/11/2008 10:37 AM, Blogger juandos said...

Does anyone actually expect LIBERAL Maryland politicos to understand basic economics?

Consider the inane idea of how liberal politicos want to finance one of their pander to parasites programs: 22 Million New Smokers Needed: Funding SCHIP Expansion with a Tobacco Tax as the Heritage Foundation figured out...

The Tax Foundation has noted since the rise in taxation on cigs, crime rises: SCHIP, Cigarette Taxes, and Crime...

How come politcos and the fools that vote for them never seem to learn the lesson that their actions always have unintended consequences?

 
At 8/11/2008 11:02 AM, Blogger Ironman said...

Here's the amazing thing, I ran some back of the envelope numbers and if the quantity of cigarettes sold in Maryland has decreased by 25%, since the excise tax was doubled, Maryland's revenues from the tax is still 50% higher than previously.

The only reason they're strapped for cash is because they've gone on a spending binge. (See juandos' comment above!...)

 
At 8/11/2008 3:19 PM, Blogger randian said...

I think they understand economics, but won't apply it to policy.

 
At 8/11/2008 3:39 PM, Blogger OBloodyHell said...

> Here's the amazing thing,

Nice point, but hardly amazing. Amusingly preposterous, yeah. But amazing? Nahhhh...

It's like the dumbshit legizlatures and the problems resulting from using the cigarette extortion money in the general revenue streams of their states.

Never mind that those moneys were entirely extorted based on the fact that it supposedly represented the excess cost to the state of smokers' health problems (or that actual analyses of such showed that smokers, by dint of having shorter lifespans, also cost the states less...) -- the state legislatures each went on a spending spree -- somehow managing to forget that the extortion money was a one-time thing. And if you commit to paying for extended programs, well, gosh, that's not a one-time thing. And so they suddenly found that they had committed to all sorts of long-term payouts which they had no capacity to fulfill.

The fact is that ALL such money should have clearly been applied to supplement health insurance for smokers, to pay for anti-smoking programs, and to subsidize various "stop smoking" measures:

"The Patch", for example, costs about 3x the already high expenses of the smoking habit it's supposed to replace -- such extorted moneys should have been used to lower the costs of "The Patch" to at least no more than that of cigarettes. Especially given that a large percentage of smokers are lower-income.



Governments are thieves.

Pure and simple.

 
At 8/11/2008 5:41 PM, Blogger Dr. T said...

"Q: Do politicians just not understand simple economics, or do they understand it, but ignore it for political purposes?"

Politicians do not understand economics, and they ignore economics for political (and personal) purposes. This worst case scenario is brought into being by our ignorant and irrational general public.

 
At 8/11/2008 9:12 PM, Anonymous qt said...

Shouldn't some of us declare a conflict of interest here? ie. aren't some of us smokers?

 
At 8/11/2008 10:16 PM, Blogger David Eisner said...

To some extent, people may be smoking less as a result:

---snip---
"There is little evidence, however, to suggest that surrounding jurisdictions are reaping a windfall in tax revenue from Maryland smokers.

Collections in the District show no consistent trend, and tax analysts in Virginia and Delaware reported no upticks in their tobacco tax collections since Maryland's rate was raised. The tobacco tax rate in Virginia is 30 cents a pack, though some jurisdictions tack on as much as an additional 70 cents. Delaware's rate is $1.15 a pack.

"If there's a bump in collections, it's hard to see the bump," said Patrick Carter, Delaware's director of revenue."
---snip---

http://www.washingtonpost.com/wp-dyn/content/article/2008/07/30/AR2008073003277_pf.html


Perhaps we'll have fewer terminal lung cancer cases to pay for in the future than we would have otherwise.

By the way, the article indicates that the lawmakers did expect cigarette sales to fall off. They've just dropped more than expected.

 
At 8/12/2008 10:24 AM, Blogger Jack McHugh said...

Good question, Mark. Certainly many don't understand it, but some do, yet with a handful of exceptions their understanding appears to have little or no effect on their voting. Which I suppose answers your question.

 
At 8/12/2008 3:37 PM, Blogger Todd said...

This comment has been removed by the author.

 
At 8/12/2008 3:39 PM, Blogger Todd said...

This comment has been removed by the author.

 
At 8/12/2008 5:30 PM, Blogger juandos said...

"Shouldn't some of us declare a conflict of interest here? ie. aren't some of us smokers?"...

Ha! Ha! Ha! qt...:-)

"There is little evidence, however, to suggest that surrounding jurisdictions are reaping a windfall in tax revenue from Maryland smokers"...

Hmmm, got that from the WaPo did you david eisner?

They never have agenda driven stories at that unbiased rag...

Its NOT in the interests of the politicos who push what ends up being a money losing agenda to come out with the facts...

ironman notes that the free market will breed bootleggers as it has in California, New York, and Illinois (I'm sure its happening everywhere else the nanny state is solidly entrenched) when they went non-smoking in public places...

ironman further noted: "Maryland's revenues from the tax is still 50% higher than previously"...

Bootleggers will take care of that little situation also...

 
At 8/12/2008 8:17 PM, Blogger OBloodyHell said...

> aren't some of us smokers?

shfffft Depends. shfffft

What are we talking about smoking?

pfffffftaaaaah


:o)

.

 

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