Wednesday, August 11, 2010

If You Tax Something, You Get Less of It

"In New York, the average state, federal and local tax on a pack of 20 cigarettes is now $6.02. That includes an 8 percent combined state and local sales tax, as well as a $1.01 federal excise tax, according to the state tax department. New York raised its tax on July 1 to $1.60 a pack to generate $260 million to help offset a $9.2 billion budget gap.

A pack of Marlboros hovered around $6 or $7 a pack at Lucky 7 before the tax hike. Now, a pack costs $9.60. The store’s cheapest, Grand Prix, costs $7.95 a pack and its most expensive, Carlton, checks in at $11.05 a pack. A pack of Senecas manufactured by Indian nations ? $3.50 at the Onondaga Nation Smoke Shop. That’s $2.52 less than the tax alone on the average pack of non-Nation cigarettes. A pack of Marlboros costs $6.50 there.

But President Jim Calvin of the convenience store association, called the tax increase a “policy disaster.” “Law-abiding stores like ours lose enormous amounts of business, state and local governments lose hundreds of millions in tax revenue, and public health loses because the financial incentive to quit is easily and routinely circumvented,” he said."

Link.
 
HT: Chris Gardner

Prediction: The cigarette tax will not generate $260 million in tax revenue.

24 Comments:

At 8/11/2010 9:50 AM, Blogger Junkyard_hawg1985 said...

"Prediction: The cigarette tax will not generate $260 million in tax revenue. "

Mark, that is a pretty safe prediction. It is like predicting the sun will come up tomorrow.

 
At 8/11/2010 10:13 AM, Blogger marmico said...

Why is it that when you tax personal income you keep getting more of it?

 
At 8/11/2010 10:19 AM, Blogger juandos said...

"Why is it that when you tax personal income you keep getting more of it?"...

Or NOT...

Remember this WSJ opinion piece from Steve Moore and Art Laffer?

Soak the Rich, Lose the Rich

 
At 8/11/2010 10:30 AM, Blogger marmico said...

Why is that when you tax corporate profits you keep getting more of it?

 
At 8/11/2010 10:35 AM, Blogger jcarroll1948 said...

Interesting that government is the entity that makes the most from tobacco, liquor, and gambling. Next up: marijuana.

 
At 8/11/2010 10:45 AM, Blogger Ironman said...

You may be looking at the new higher tobacco tax in New York the wrong way - it's really a huge shot in the arm for the bootlegging business!

Then again, maybe they'll get lucky so they can use the extra tax collections to build the moat it will take to really make tax collections meet projections.

 
At 8/11/2010 10:49 AM, Blogger juandos said...

"Why is that when you tax corporate profits you keep getting more of it?"...

Or NOT if the BEA is to be believed...

 
At 8/11/2010 11:03 AM, Blogger Buddy R Pacifico said...

Question to smokers: Are E-Cigs an alternative to tobacco cigs? If so then how do you tax them? Oregon has just banned these alternative cigarettes so the tax revenue stream resumes its flow.

 
At 8/11/2010 11:08 AM, Blogger Brad Evans said...

Iyengar, in Slate (http://bit.ly/dzhM85), wrote that the decrease in consumption may not be as much as predicted. She attributed this to "reactance," which I think is the idea that when an authority tells you what to do, you will do the opposite. It probably counts as irrational behavior.

On the Pigovian front, another idea to decrease consumption would be to create a shortage, by putting in a price ceiling.

 
At 8/11/2010 11:20 AM, Blogger juandos said...

"Oregon has just banned these alternative cigarettes so the tax revenue stream resumes its flow"...

Hmmm, speaking of Oregon you might find this New York Daily News article from June of this year interesting: U.S. loses more than $250 million in tax revenue from tobacco law loophole

 
At 8/11/2010 11:35 AM, Blogger Benjamin said...

This is exactly right--and why we should tax pollution, and luxury housing.

BTW, David Stockman, the Reagan OMB top gun, has authored a truly superb piece on the Republican Party. Outstanding. Maybe Mark Perry will pick up on it.

http://www.marketwatch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10

 
At 8/11/2010 12:11 PM, Blogger Paul said...

David Stockman is suddenly every Obama voting idiot's favorite Republican, that is if he still calls himself one.

 
At 8/11/2010 1:01 PM, Blogger Benjamin said...

Paul-
That may be--but you may wish to consider what he has to say.
The Republican Party is simply not credible or capable. Stockman says so.
All the sanctimonius Republican pettifogging about the deficit will vaporize as soon as they win again.
Can a Sarah Palin-Michelle Bachman ticket win in 2012?
Stay tuned.
Meanwhile, Stockman says you might as well migrate to another country. The R-Party wrecked our economy with expensive debt-financed wars ($3 trillion for Iraqistan) and rural lard.

And while the R-Party says they believe in creationism, and eternal euphoria in the hereafter-- billions of years of nirvana, imagine it--they are deeply, deeply concenred about hte marginal tax rate on the wealthiest Americans in the US in 2012.

Paul, your argument is with Stockman. I would say he knows far more about the true nature of the Republican Party than you.

 
At 8/11/2010 1:04 PM, Blogger Shakes The Clown said...

You can get a pack of smokes for less than $4 in Kentucky. You don't even have to be a drug dealer anymore, just get a semi and load up in Kentucky and drive up to New York. I wonder how many packs of cigarettes you can fit in a semi?

I bet you could make a quarter of a million on a load.

 
At 8/11/2010 1:42 PM, Blogger Hydra said...

The cigarette tax will not generate $260 million in tax revenue. But think of all the GDP that will be genrated by people trying to avoid the tax.

 
At 8/11/2010 2:12 PM, Blogger Paul said...

"The Republican Party is simply not credible or capable. Stockman says so."

Ohhh, Stockman says so! You're such a joke, Benji. Your boyfriend blows up the deficit to 1.5 trillion for several years running, and you apparently aren't even aware of it. Give me Bush/GOP deficits any day over this insanity. Just yesterday, your boyfriend and the Democrats rammed $26 billion down the nation's throat in order to bail out their union buddies in the public sector. It was pretty much a party line vote. This is routine for them.


Are you even aware of this?

 
At 8/11/2010 2:14 PM, Blogger Paul said...

"..they are deeply, deeply concenred about hte marginal tax rate on the wealthiest Americans in the US in 2012."

Ah, so now we're back to Benji the class warrior. Milton Friedman would be so disappointed in you, Benji boy.

 
At 8/11/2010 2:26 PM, Blogger fboness said...

"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation." Justice John Marshall, McCullough vs. Maryland, 1819

Sometimes destruction is the goal.

 
At 8/11/2010 4:19 PM, Blogger KauaiMark said...

"...financial incentive to quit"

Isn't this exactly why the govt "claims" high taxes are imposed? So why is the govt complaining? They are getting what they asked for.

 
At 8/11/2010 8:29 PM, Blogger juandos said...

I see the pseudo benny is still making it up as he goes along and not feel silly for saying it...

What? No proof reading?

"The cigarette tax will not generate $260 million in tax revenue"...

Well hydra 'if' this report is accurate you would be wrong...

On page five there's Tax Year Highlights that has some interesting numbers...

 
At 8/11/2010 11:19 PM, Blogger Ron H. said...

"...financial incentive to quit"

Isn't this exactly why the govt "claims" high taxes are imposed? So why is the govt complaining? They are getting what they asked for.
"

I can't find the reference, but I believe a fairly recent tax was imposed on sodas containing sugar in New York. The stated purpose was to discourage sales of these sodas supposedly for health reasons. The problem is, the estimated revenue from this measure was projected to be higher in the second year. Some deterrent.

 
At 8/12/2010 9:50 AM, Blogger juandos said...

"I can't find the reference, but I believe a fairly recent tax was imposed on sodas containing sugar in New York"...

The New York Times wails and whines: Failure of State Soda Tax Plan Reflects Power of an Antitax Message

July 2, 2010

 
At 8/12/2010 1:01 PM, Blogger Hydra said...

Well hydra 'if' this report is accurate you would be wrong...

If the report turns out to be accurate, MJP and I will both be wrong.

 
At 8/12/2010 2:12 PM, Blogger Ron H. said...

"The New York Times wails and whines: Failure of State Soda Tax Plan Reflects Power of an Antitax Message"

Thanks, juandos, you always seem to have the right info at the right time.

 

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