What Are You Smoking?

Brad Shiller claims in the WSJ that the Obama administration's new federal tobacco tax amounts to increased taxes on the poor. Prof. Shiller does not cite any source noting that cigarettes are the purview of the poor. He does not indicate how much the actual tax increase would affect the average smoker. Indeed, after 2-3 sentences about how this constitutes a reneging of campaign promises, Prof. Shiller spends the rest of the article on 2 points:

(a) "Fairness": This will cost states a lot of tax revenue because higher taxes mean lower cigarette sales, and
(b) "Security": This will increase the level of tobacco smuggling.

To Shiller's first real point: let's talk about the real cost of cigarette smoking - the health costs that many of us bear either in the increased cost of private insurance or the outlays of public moneys in public hospital bills. Shiller never mentions what the reduction in cigarette sales could mean to that number.

Further, I have no idea what this has to do with fairness. Sure, the tax will have more of an effect on sales in states where the smokestax is lower. Would Prof. Shiller really have the federal government set a different tax level in each state? How unfair!

To his second point regarding smuggling. I imagine the increased cost would raise smuggling. That's why we have an ATF. Shiller's statement that this money likely funds terrorists is again, just a bald statement.

To the editorial staff of the Wall Street Journal - how about demanding a little integrity from your writers?

1 comment:

David said...

I haven't read the article, so ++grain-of-salt.

It has certainly been part of conventional wisdom for a long time that consumption taxes are more regressive than either asset or income taxes: poor people consume, but have fewer assets and less income. Perhaps what he was trying to say was that this will affect poor smokers more than rich ones?

You're dead-on with regard to the smuggling argument.