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Free Citizen

This writer espouses individual liberty, free markets, and limited government.

Location: Jackson, Mississippi, United States

Sunday, January 11, 2009

Sock It To Those Sorry Nicotine Addicts!

In his 2003 campaign for governor, Haley Barbour repeatedly said, "I'm not for raising anybody's taxes." Recent events have put an addendum on that promise: "... unless, of course, a 'blue-ribbon' commission (appointed by me) proposes a tax hike on those pariahs who happen to be addicted to nicotine."

William Shughart, economics professor at Ole Miss, really nails it in his column in yesterday's Clarion-Ledger.

"... politicians and media pundits have been scrambling to find a way to raise a tax that, at 18 cents per pack, is described as being 'among the lowest in the nation' almost as often as Gov. Barbour is referred to as a 'former [Washington] tobacco lobbyist.'"

Since Mississippi's per-capita income is THE LOWEST in the nation, perhaps we should consider cutting the cigarette tax (at this writing, a House committee has approved raising the tax to $1.00 per pack).

"... the excise tax on cigarettes is very unfair. Indeed, because cigarette smoking is much more prevalent among individuals at the bottom of the income distribution than among those at the top, the cigarette tax is the most regressive of all taxes - even more regressive than the sales tax. The commission's proposal to raise the excise tax rate to 50 cents per pack, therefore, amounts to a policy of balancing the state budget on the backs of those who are least able to pay." (bold added)

Yes, the politicians and pundits who have been screaming for a tobacco tax increase truly care about the downtrodden poor, don't they? The polls show 70-plus percent of our citizenry favoring such a tax hike, and that's what really matters, isn't it?

"Careful studies... conclude, however, that smokers already pay their own way at current excise tax rates in every state, including Mississippi. Indeed, the state is more than justly compensated for any such [health care] costs when one adds the $20 million paid into the treasury every year by the major tobacco companies to settle former Attorney General Mike Moore's lawsuit."

Those millions going into government coffers are, to be sure, paid by the end users of the product, as businesses almost always pass additional costs on to the consumer.

"But the Commission wants even more. It recommends imposing a new tax on cigarette manufacturers not already paying into the settlement fund."

If greedy government does enact this new tax, it will also be paid by the nicotine addicts, of course.

"The state can expect further revenue losses as Mississippi's smokers cross borders to make their purchases in jurisdictions with lower tax rates."

When the cost of a product becomes prohibitive, people do indeed change their behavior. During a period of unemployment, a smoker friend of mine stopped buying cigarettes by the pack and instead "rolled his own."

I was introduced to the cigarette bootlegging industry some years ago, when I was leaving Kentucky, which, as a tobacco producer, had low cigarette taxes. As I approached the Mississippi River bridge, I saw a big sign warning motorists of high-tax Illinois's criminal penalties for selling untaxed cigarettes in that state. Today, some terrorists bootleg cigarettes to generate revenue.

"Selective excise taxes represent predatory public finance at its worst. They punish people simply because of their consumption choices. Even more remarkably, the commission's endorsement of discrimination against smokers, along with the gallons of ink that will be spilled over it, is all about a trivial fraction (one-tenth of 1 percent) of total state tax receipts."

"Predatory" is a most appropriate description of governments that reach ever deeper into the pockets of their citizens-- especially poor citizens who use a legal product.

But let's not forget all of the wondrous things that government does with the money that it confiscates from its citizens.


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