Over at Reason Magazine, Jacob Sullivan lambasts a proposed hike in New York state's tax on cigarettes. Sullivan says that this policy will adversely affect the poor, who are predominately those that smoke. The point is well taken. But then he suggests that this is not a "progressive" policy. If, by that, he means that those with more means pay less of the burden, I get it. But if he means "progressive" in the sense of progress, I would argue that it is progressive.
I can't speak for what New York plans to do with the tax revenue generated from the increase, but if it is used to offset some portion of the healthcare costs associated with smoking (particularly those costs paid by the state to cover the bills of those unable to pay for their health-related costs) , then this is really just a pigouvian tax. Even if the revenue is not redirected to Medicaid, though, it does address an externality. There is a social cost of second hand smoke that is not incorporated into the price of a pack of smokes. Sure, it's not direct, but this essentially captures at least part of that cost.
I understand that this kind of policy is objectionable in that a paternalistic government is trying to influence the decision-making of individuals. Libertarians typically recoil at such policies. But this tax also internalizes some of the externalities of smoking. And that kind of progress in the tax code is something I would embrace.
2 comments:
There is good evidence that the healthcare burden of smokers is lower than nonsmokers. It's a popular belief that "we" are somehow paying the bill for smokers poor health, but when you look at the data, that belief just isn't tenable. The same is true for obesity
Surely there is some externality to second-hand smoke. How big is it? It is already illegal to smoke in the workplace or in public places. So unless you have a parent that smokes you never HAVE to be around someone while they are smoking. Second-hand smoke has been effectively eliminated. In my opinion regulation has gone way TOO far.
Perhaps we want to reduce the externality to family members of a smoker? (1)Cigarette taxes are already very high. Why should we think the externality hasn't already been addressed? (2)We allow families to make all kinds of decisions that affect their health. Why should we make efforts to change their behavior in this one specific area in the name of "protection". (3)The externality from a family member who drinks is likely much larger. In the scheme of things, secondhand smoke is small chicken.
Bottomline, I think our society has unjustifiably demonized smoking. It's an easy target because everyone can say, "yeah, tax those nasty smokers so I don't have to pay for policy XYZ." Alone, those motives are questionable. In the long-run, though, almost no new tax is used to offset other taxes. The result is just bigger government.
I believe that the (very new and not yet replicated) evidence is that because smokers/obese people live shorter lives, their overall health costs are the same -- but not lower -- than people who don't smoke and live longer.
And if you're thinking of that study about obese workers earning lower wages due to their higher health costs -- it has a lot of limitations, and is not yet accepted as generalizable (plus it only applied to men of a certain age group who earn hourly wages).
Just to keep the record straight.
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