Tobacco and the Flat Tax
First, a quick introduction. I would like to thank the people at Independent Sources for honoring me with the invite to express my opinions here. I go by Moon. I host Moonage Webdream. The thing I like doing most is looking outside the box on issues. There are tons of rhetoric on every issue right now. The advent of the internet has just made that avalanche of rhetoric that much more difficult to sift through. So, what I like to do is take issues and basically tear them down to the core, and see what comes out.
A perfect example of that is the current attack on tobacco, mixed with the current push for a federal flat tax. Disclaimer up front, I am a smoker, and I don’t support the flat tax. Mixing these two topics together illustrates why I don’t support the flat tax.
In the late 70’s, it was determined that smoking cigarettes was not a terribly good thing to do. By the early 90’s, it was decided that root of all evil was the cigarette. It was dirty, it smelled bad, and simply inhaling someone else’s smoke one time would kill you and all your loved ones dead pretty much instantly. Given all this negative publicity, and the very public hated of tobacco by the White House, namely Hillary Clinton, the federal government and state governments went on a taxing spree never seen before. The assumption of course was the by raising the cost of cigarettes to a prohibitive level, it would compel people to stop smoking. Made sense, seemed to work.
Tobacco Taxes and Payments for California
Now, looking at California, which is my host for this week, let’s look at what a flat tax would do. It has been bantered around that the flat tax would be around, let’s say, 10% of all sales. Now, the actual manufacturer’s cost of a pack of cigarettes is $1.48. The industry mark-up in California is about $.98. Taxes account for about $2.03. That represents about 45% of the total cost in taxes. Knock that down to 10% and that takes about $.25 for the feds. Being as I would assume that if the feds outlawed regressive taxing schemes, the states would be forced to comply, then California I would assume would have about the same rate. So, instead of $2.03 a pack in taxes, it would be about $.51. That would make the cost of a pack of cigarettes about $2.97 a pack as opposed to $4.49 a pack as it is now.
If the current assumption that the escalating cost of tobacco is helping prevent people from smoking, then it would be safe to argue that lowering the cost of tobacco substantially would encourage more people to smoke.
Is this what people truly want? Sure, as a smoker, I would be thrilled that I was saving a ton of money on cigarettes. But, my social conscience tells me that I don’t want the next generation smoking. It’s a waste of money and it’s probably not a healthy thing to do. But, the Republican in me is over-whelmed at the wasted money aspect. For the next generation, I want cigarettes even more expensive than they are now not cheaper. The last thing we need to accomplish that is lowering the tax rates by eliminating the government’s ability to adjust the federal rates for specific issues.
Although the US federal and state tax systems are mind-boggling complex, they got that way for social reasons more so than logical math reasons. If we eliminate the current taxation system, the government loses it’s primary tool in discouraging certain behaviors such as smoking. It loses the ability to encourage people to try new innovations such as hybrid cars and fuel cells for their homes. Other than arguing that the US tax code is too complex, I really see no reason to gut the current system. Streamline it for sure. But don’t throw the baby out with the wash when we need that baby the most. This country is on the verge of making a fairly painful transition to new energy sources. We’re going to need all the incentives we can get to compel people to do it. Right now is not the time to strip the government of the most powerful incentive it can offer.
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August 27th, 2005 at 7:16 pm
“But, my SOCIAL CONSCIENCE tells me that I don’t want the next generation smoking.”
What does a Republican Really know ’bout that?!?!
Sincerely,
H.Clinton
August 27th, 2005 at 10:47 pm
Great Posting Moon. As a libertarian, I don’t particularly care if people smoke as long as I don’t have to breath the air. As a new friend however I think you should quit. I know that there is nothing as annoying as a non-smoking preaching to a smoker, but…
August 27th, 2005 at 10:52 pm
The author seems frightened and disoriented. Was this post written by Christian Irwin? Did he really mean to say Flat Tax, which refers to Income taxes, or is he attacking the idea of a National Sales Tax? Does he know the difference? God damn you Walter! You f**kn’ asshole! Everything’s a f**kin’ travesty with you, man! And what was all that sh*t about Vietnam? What the F**K has anything got to do with Vietnam?
August 28th, 2005 at 7:10 am
I fully plan to quit, eventually. It’s just getting too expensive to enjoy any more. Call it a Flat Tax, a National Sales tax ( which could be different than the Flat Tax, or, it could be not. ), call it whatever you want, but, it would knock about $1.50 off of every pack and make cigarettes once again readily available to any teen and more enjoyable for those smoking now, thereby removing the financial incentive to quit.
August 28th, 2005 at 7:26 pm
Anthony:
What ever happened to personal responsibility and freedom of choice?
Why isn’t there a $2.00 tax on each Big Mac sold in this country when obesity and diabites are far worse than lung cancer?
Why buy into the government line of BS when every State with the exception of the poorest one being Mississippi spent the tobacco settlement money on everything else except what it was supposed to go to.
There are no people in this country that think smoking is harmless to their health yet they CHOOSE to smoke anyway just like you and me. It is illegal for the government to make me pay more for the services they provide everyone else that doesn’t smoke.
If you want your children and grandchildren to grow up smoke free that is YOUR responsibility, not the governments nor mine. By the way, my son doesn’t smoke because he CHOOSES not to.
The flat tax is the only fair way to treat everyone equally. We need to wean the various governmental agencies off the cigarette tax money just as well as weaning America off foreign oil.
People need to take some personal responsibility and not expect the government to tell us what we can and can not do. That attitude of having Big Brother making my decisions for me is not FREEDOM at all.
August 29th, 2005 at 9:23 am
I could not agree more with the personal responsibility argument however to me smoking has always been a special case because of the significant social costs involved. Since a good percentage of the costs associated with smoking are external to the person making the personal decision, I’ve felt that the taxes:
a) partially (and perhaps completely) offset the external costs.
b) reduced the extent of the external costs by the reduction in cigarettes smoked due to the higher cost.
Admittedly neither of these arguments is fool proof but they have been strong enough for me to alwasy support increasing the taxes on cigarettes while allowing people to make the personal decision on whether or not they want to smoke–as long as they don’t do it around me.
As for how the tobacco settlement you bring up a good though I think different point. I’d be interested to knowing how the settlement money was really spent and the reasoning behind it. If you have that data or are interested in writing about it feel free to email us here and we’ll look at putting it up.
Finally, as far as your “Big Mac” analogy, it’s a good argument and there are certainly social costs with that as well…medicaid, etc. My hope on that one is to see more of the costs associated with people living unhealthy lifestyles (like morbid obesity) bear more of the costs associated with that (the same way smokers often pay higher medical insurance). To me, it makes all the sense in the world that people who eat unhealthily would pay more for that decision.
Of course, I can just hear it now, “obesity is a disease, it’s not their fault, low income people don’t have time/money to eat healthy food.” I’m sorry I don’t buy any of these arguments. I’ve seen too many people of size eating super-sized chili cheese fries when other things were on the menu to move the blame away from the individual (or the parents in the case of juvinal obesity).