3853-Tobacco-Taxes-Health | 125-KevinG | Our-Two-Cents-Cigar-Blogs

If you're reading this website, you probably know all about SCHIP and tobacco taxes. It has been discussed to death and I do not want to beat a dead horse. Instead of discussing the politics of it, I would like to raise the issue of logic ... or lack thereof.

I scanned a bunch of news stories and press releases about it this morning. There were a bunch of them as President Obama signed the bill yesterday.

I was prompted to make this post while reading this press release:
http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/02-04-2009/0004966727&EDATE=

Basically it talks about what a wonderful thing it is to have the State Children's Health Insurance Plan law (SCHIP), and implies how righteous it is to have the evil disgusting smokers pay for it with increased taxes on tobacco products.

Aside from health insurance, keep in mind they are also talking about how troubling it is that use of small cigars and cigarillos has increased amongst youth, and I can picture them nearly kneeling down to praise the Lord that there is proof that increasing taxes on tobacco products decreases their use.

Ok, fine. Like I said, let's skip the politics for a moment and consider the absence of simple basic logic.

Please note this line from the above referenced press release:
"For years there has been an established correlation between increased taxes on tobacco and a decrease in consumption rates. This is especially true among price-sensitive youth and young adults," Healton said. "The signing of SCHIP into law is indeed a momentous victory for the public health community on several fronts."

Yes, but those two different fronts compete against each other!

Victory #1: The kids get health insurance and it is paid for by tobacco taxes! Woo hoo! Let's start the celebration!

Victory #2: The oh so misguided young tobacco smokers will decrease their use of tobacco because the prices went up from the taxes! Great!!! Except for the fact that lower use of tobacco equates to lower tax revenues from it, which now negates "Victory #1".

I guess no one told them there would be math involved.

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February 4, 2009 Posted by KevinG | Untagged

Comments (1) Add Comment

On Victory #2
written by Frank C, April 04, 2009

Alright, don't hate me for this one but being a fan of economics I had to offer a correction. Increasing taxes does not necessarily decrease revenue from taxes. Technically, a tax revenue function is non monotonic. All that means is that revenues from taxes increase up to a certain point where it levels off, then any increases beyond that lead to an actual decrease in revenue. Knowing which point we are actually at would help. But I'm guessing all the anti-smoke (government subsidized/sponsored) lobby prevails. There used to be a time when the Constitution prevented the simple majority from trampling the rights of the minority. Unfortunately, as it stands, unless an activity contributes to GDP and the latest populist rave, it is targeted, taxed, and destroyed.

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